Current Developments in Legal Fees

Edited by Gary Greenfield, Founder, Litigation Cost Management

The following are materials which we have found to be interesting developments in the area of legal fees. For earlier materials, visit the archive. If you would like more information about any of these decisions or developments, or you have cases or information you would like to share with others, feel free to contact us.


Summary of cases cited:

  • Attorneys’ fees available in Telecommunications Act cases through Civil Rights Act
  • PLRA rate limitation does not apply to claims under ADA
  • Attorneys’ fee award reversed despite absence of jurisdiction to review merits
  • Circuits disagree on whether a settlement agreement alone is sufficient for “prevailing party status” under Buckhannon
  • Defendants can recover attorneys’ fees for bad faith defamation actions in California
  • FEHA fees belong to attorney absent agreement to contrary
  • Need for special legal expertise and lack of time to find other counsel are not "special factors" under the EAJA to justify enhanced billing rates for counsel
  • Supreme Court nixes "catalyst" theory
  • Unnamed class members may appeal award of fees without intervening in district court
  • Fees allowed for "bad faith" government action under the Equal Access to Justice Act are subject to $75 per hour cap in administrative proceedings but available at market rates in court proceedings
  • California Supreme Court upholds fees for in-house counsel and affirms use of market rates in calculating appropriate amount
  • United States Supreme Court reverses Adams decision imposing liability on sole shareholder for fees through amendment of judgment
  • Class members who fail to "opt out" of wage overtime case are not liable for successful defendant's attorneys' fees
  • Common legal, as well as factual, issues may provide nexus among claims to support award of attorneys' fees
  • Party may obtain relief from otherwise final fee award if underlying judgment is reversed
  • Employee exonerated by jury of sexual harassment charges can recover legal fees from employer who settled prior to trial
  • Law firm not entitled to reimbursement for attorneys' fees expended in successfully defending against its former client's malpractice claim
  • Substantial award of punitive damages does not eliminate the right to attorneys' fees
  • Right to recover market rates for in-house counsel's time argued to California Supreme Court
  • Long-hour days part of a litigator's job
  • Supreme Court again rejects effort by successful defendant to recover attorneys' fees
  • Expert witness fees not recoverable as attorneys' fees nor as "necessary expenses" of collection under contractual attorneys' fees clause
  • Award of attorneys' fees not required after improper removal to federal court
  • Supreme Court to decide whether non-party corporate officer can be made liable for corporate defendant's obligation to pay attorneys' fees to prevailing plaintiff
  • Lawyer's violation of Rules of Professional Conduct may-but need not automatically-result in forfeiture of attorneys' fees
  • Victory at District Court level not sufficient to establish that government's position "substantially justified" under Equal Access to Justice Act
  • California's settlement offer/cost shifting statute can result in both the plaintiff and defendant recovering attorneys' fees
  • Government must produce time records for review when seeking fees
  • Supreme Court resolves effective date of attorneys' fees rate limitation in Prison Legal Reform Act
  • Parties entitled to recovery of attorneys' fees for in-house counsel at market rates
  • Successful defendants under the ADA entitled to attorneys' fees only if plaintiff's claim was frivolous
  • Fee award under California Fair Employment and Housing Act belongs to client not attorney absent agreement to the contrary
  • Failure by class action defendant to communicate intention to provide full relief sought by plaintiff renders defendant liable for attorneys' fees even though litigation did not provide benefit to the plaintiff class
  • Failure to contact defendant to try and settle claim before filing suit justifies reduction of attorneys' fee award
  • Refusal to mediate in front of judge's law clerk cannot serve as basis for reduction of attorneys' fees award
  • Plaintiff in alleged SLAPP suit remains liable for attorneys' fees even though entitled to dismiss suit while SLAPP motion under submission
  • Sole shareholder of plaintiff corporation found liable for attorneys' fees in patent case based on inequitable conduct even though not named as a party in the litigation
  • Circuit Court decisions limit District Court's powers under Rule 11
  • General information in legal bills is not within the attorney-client privilege and is therefore discoverable, but not information regarding nature of research undertaken or legal advice given
  • Obstinacy has its price--1st Circuit affirms award of prejudgment interest of $868,000 plus attorneys' fees
  • Insurer compelled to pay defense costs has the burden of proof as to the reasonableness of the fees and expenses paid
  • Failure to require allocation of fees in billing entries is abuse of discretion
  • Chicken Stomps Dinosaur: San Diego Chicken gets attorneys' fees for defending copyright infringement suit by Barney
  • Conflict of interest for class counsel does not bar their ultimately sharing in fees from settlement of class action
  • The United States, but not private parties, can recover reasonable attorneys' fees as "response costs" under CERCLA
  • Two out of three Circuits agree - Prison Legal Reform Act's limitation on hourly rates applies to cases pending at time of the Act's effective date
  • ... but Third Circuit rules that fees are recoverable under the PLRA for the time spent in seeking fees

 Attorneys’ fees available in Telecommunications Act cases through Civil Rights Act

Abrams v. City of Rancho Palos Verdes, 2004 U.S. App. LEXIS 564 (9th Cir. 2004), January 15, 2004

Differing with the Third Circuit decision in Nextel Partners Inc. v. Kingston Township, 286 F.3d 687 (3rd Cir. 2002), the Ninth Circuit has ruled in Abrams that the Telecommunications Act of 1996 does not preempt the Civil Rights Act, 42 U.S.C. § 1983.  Accordingly, the plaintiff could seek attorneys' fees and damages not available under the Telecommunications Act by establishing a claim under the Civil Rights Act (such as for arbitrary action amounting to a denial of due process) when he was improperly denied a conditional use permit to use a radio antenna for commercial purposes.


 PLRA rate limitation does not apply to claims under ADA

Armstrong, et al. v. Davis, et al., 2003 U.S. App. LEXIS 2189, February 10, 2003

The Ninth Circuit has ruled that the rate limitation for attorneys’ fee requests under the Prison Litigation Reform Act does not apply to claims brought under the Americans with Disabilities Act (or the Rehabilitation Act of 1973). The Court further held that it was within the discretion of the District Court, under the circumstances of the case, to also not apply the PLRA rate limitation to a due process claim for which fees were sought under 42 U.S.C. § 1988 and which would normally be subject to the PLRA rate limitation. Finally, the Court held the plaintiffs could recover fees for work done in a different case involving different parties where the issue (the application of the ADA to state prisoners) was central to Armstrong.


Attorneys’ fee award reversed despite absence of jurisdiction to review merits

Dahl, et al. v. Rosenfeld, et al., 9th Cir., 2003 U.S. App. LEXIS 1005, January 23, 2003

 

The Ninth Circuit has ruled that, despite the absence of jurisdiction to review the remand of a removed case, it would reverse the related award of attorneys’ fees because the remand order was incorrect. The District Court had granted both the motion to remand and the plaintiffs’ request for attorneys’ fees for obtaining the remand. The Ninth Circuit ruled that it had no jurisdiction to review the remand order. However, the Court did have jurisdiction to review the attorneys’ fee award and had to reach the merits of the remand order in order to decide the attorneys’ fees issue. After considering the merits of the remand order, the Court concluded that the remand was improper and therefore reversed the attorneys’ fee award, but the case nevertheless remained in state court.

 


Circuits disagree on whether a settlement agreement alone is sufficient for “prevailing party status” under Buckhannon

Barrios v. California Interscholastic Federation, et al., 9th Cir., No. 00-56479, 2002 U.S. App. LEXIS 673, Jan. 16, 2002

 

Smyth v. Rivero, 4th Cir., No. 00-2453, 2002 U.S. App. LEXIS 2665, Feb. 21, 2002

 

Last year, in Buckhannon Board & Care Home, Inc., et al. v. West Virginia Department of Health and Human Resources, 532 U.S. 598 (2001), noted below, the United States Supreme Court ruled that being a “catalyst” to a “voluntary” change in a defendant’s policies or practices did not accord one “prevailing party” status entitled to recover attorneys’ fees in litigation brought to bring about the change.  The Court appeared to state that a private settlement agreement without more was inadequate to accord one “prevailing party” status.

 

The Ninth Circuit has ruled in Barrios that an enforceable settlement agreement also accords one “prevailing party” status despite the fact that there is no judgment or consent decree entered as part of the agreement.  The Ninth Circuit viewed as dictum the statement by the Supreme Court that a settlement agreement alone was not sufficient absent a judgment or consent decree.

 

In contrast, the Fourth Circuit has ruled in Smyth that a settlement agreement alone is not sufficient under Buckhannon.  Either an order incorporating the terms of the agreement or a separate provision providing for continuing jurisdiction of the court to enforce the agreement is required in the Fourth Circuit’s view.

 


Defendants can recover attorneys’ fees for bad faith defamation actions in California

Martin v. Szeto, et al., Cal.Ct.App., 2001 Cal.App. LEXIS 2732, December 18, 2001

 

Disagreeing with an earlier opinion of the same Court, the California Court of Appeal has held that, under California Code of Civil Procedure Section 1021.7, defendants may recover their attorneys’ fees in a defamation action which the plaintiff is found to have filed in bad faith.  The Court rejected an earlier opinion which had held that Section 1021.7 was limited to allowing only police officers to recover fees for bad faith defamation actions brought against them.

 


FEHA fees belong to attorney absent agreement to contrary

Flannery v. Prentice, et al., Cal. Supreme Court, 2001 Cal. LEXIS 5256, August 13, 2001

 

Reversing the Court of Appeals (the lower court decision is noted below), the California Supreme Court has held that, absent proof of an enforceable agreement to the contrary, an attorneys’ fee award under the California Fair Employment and Housing Act belongs to the attorney, not the client.

 


Need for special legal expertise and lack of time to find other counsel are not "special factors" under the EAJA to justify enhanced billing rates for counsel

In re Sealed Case, D.C.Cir., No. 00-5116, July 3, 2001

The Circuit Court for the District Circuit, while acknowledging that the government's unjustified actions put appellant in an "atrocious" position, has held that, even though appellant may have needed lawyers with special legal expertise to represent it and the government acted with so little notice to appellant that it did not have time to locate different counsel in any event, the statutory limit of $125 per hour under the Equal Access to Justice Act could not be exceeded. Although the statutory limit can be exceeded where a "special factor" justifies it, neither the need for specialized legal expertise nor the lack of time to find other counsel justified an enhancement to the hourly rate.


Supreme Court nixes "catalyst" theory

Buckhannon Board & Care Home, Inc., et al. v. West Virginia Department of Health and Human Resources, et al., U.S. Supreme Court, No. 991848, May 29, 2001

The United States Supreme Court has ruled that fees are not available to a plaintiff in cases under the Fair Housing Amendments Act of 1988 and Americans with Disabilities Act–and presumably other federal statutes that follow the "prevailing party" approach to legal fee entitlement–merely because the plaintiff's lawsuit may have been a "catalyst" in bringing about a change in the defendant's conduct. The Court affirmed the Fourth Circuit which, alone among the Circuit Courts, had held that it was not enough for a plaintiff to show that its lawsuit was a catalyst in bringing about an alteration in the defendant's conduct where the defendant "voluntarily" decides to change its conduct in accordance with the relief sought by the plaintiff and renders the lawsuit moot.

Comment: There will be at least two immediate ramifications from the decision. The Court states repeatedly that, in order for there to be an award of attorneys' fees, some type of judicial imprimatur is required on the substantive result in the case––typically a judgment or consent decree. Thus, where a case is being settled, to support an eventual request for fees, the plaintiff will insist on an order being entered with regard to the defendant's future conduct. Where a case is not settled, but a defendant decides to alter its conduct in accordance with what the plaintiff is seeking and then moves to have the case dismissed as moot, the plaintiff will have to fight such a motion, not only to obtain an order to prevent a return to the former conduct, but also as a predicate to a request for fees.


Unnamed class members may appeal award of fees without intervening in district court

Powers v. Eichen, 9th Cir., 98-56997, 229 F.3d 1249,10/23/2000

The Ninth Circuit has held that an unnamed member of a class, who filed an objection to a fee request, may appeal the award of fees even though he did not intervene in the District Court. The Court further held that it was not an abuse of discretion to use the percentage method to calculate the fees, rather than the lodestar method, and that the fees could be calculated based on the gross recovery, rather than the "net" (gross recovery minus the litigation expenses.) However, the District Court awarded 30% of the common fund as the fees and failed to specify the basis for departing from the benchmark of 25% established by the Ninth Circuit, either in its Order or in the record at the hearing. The Ninth Circuit thus vacated and remanded the Order for recalculation of the fees.


Fees allowed for "bad faith" government action under the Equal Access to Justice Act are subject to $75 per hour cap in administrative proceedings but available at market rates in court proceedings

Mendenhall v. National Transportation Safety Board et al., 9th Cir., No. 98-70211, May 22, 2000

Reversing its own decision in its earlier remand in the case, the Ninth Circuit ruled that, when the government is guilty of "bad faith" in a case in which fees are recoverable under the Equal Access to Justice Act, the EAJA statutory cap of $75 per hour on the fees is applicable for proceedings before an administrative agency, but that fees at market rates are available for any proceedings before a court.

Ironically, because the agency on the remand awarded fees at what it considered market rates in compliance with the now-held erroneous Ninth Circuit order and the government failed to cross-petition for review of the agency's decision, the plaintiff's fees remained at market rates despite the Ninth Circuit's acknowledgment that its prior ruling had been incorrect.


California Supreme Court upholds fees for in-house counsel and affirms use of market rates in calculating appropriate amount

PLCM Group, Inc. v. Drexler, Cal. Supreme Court, No. S080201, May 8, 2000

Affirming the Court of Appeal decision discussed below, the California Supreme Court has held that clients can recover fees under California Civil Code Section 1717 for the time of in-house counsel used to litigate a case. The Court further held that utilizing market rates for the hourly rate to apply was appropriate and that a "cost" approach–identifying the actual cost to the client of the in-house lawyers–was not necessary. The Court did not hold that the market rate approach was required, but rather that its use by the trial court was within the broad discretion of the trial court to fix reasonable fees.

The Court also stated that, consistent with prior California cases, but inconsistent with many other (particularly federal) courts, the failure to keep contemporaneous time records was not fatal to the claim for fees, noting that the plaintiff seeking the fees submitted detailed evidence to support its reconstruction of the time claimed to be expended. The Court did suggest, however, that maintaining contemporaneous time records when a fee request was possible would facilitate accurate calculation of the fees and minimize problems inherent in reconstructing records months or years after the work was done.

Comment: This decision will likely have a major impact on fee requests on a number of fronts. It is becoming more and more common for in-house counsel to be actively involved in cases, along with outside counsel, and increased efforts to recover for their time should be anticipated. In that light, cases such as FDIC v. Bender, discussed below, should be reviewed, where the Court held that government "in-house" counsel, while eligible to recover fees, could not recover for time spent in acting as liaison between outside counsel and the government agency that was the party, as distinct from time in actively litigating the case.


United States Supreme Court reverses Adams decision imposing liability on sole shareholder for fees through amendment of judgment

Nelson v. Adams, U.S. Supreme Court, No. 99-502, April 25, 2000

The United States Supreme Court has reversed the Federal Circuit Court decision in Ohio Cellular Products Corporation, et al., v. Adams USA Inc., et al., discussed below. In the trial court, the successful defendant first recovered attorneys' fees against the plaintiff corporation and thereafter successfully moved to amend its third party complaint to add the sole shareholder of the corporation as a party and simultaneously to amend the judgment itself containing the fee award to include the shareholder as a party liable for the fees. The Federal Circuit affirmed, but the Supreme Court held that the amending of the fee award, without first giving the shareholder the opportunity to contest the claim for attorneys' fees, violated due process.


Class members who fail to "opt out" of wage overtime case are not liable for successful defendant's attorneys' fees

Earley et al., v. Superior Court [Washington Mutual Bank], Cal.Ct.App., No. B134741, April 20, 2000

A California Court of Appeals has ruled in a class action case seeking payment of overtime wages pursuant to the California Labor Code that the class notice did not have to inform the plaintiff class members that, if they did not opt out of the class, they might be liable for the defendant's attorneys' fees and costs if the defendant were successful. The Court of Appeal ruled that Section 1194 of the California Labor Code does not provide for attorneys' fees for a successful defendant, but only for a successful plaintiff. As an alternative ground for its decision, the Court further ruled that absent class members, at least when they are identified on an "opt out" basis, could not be held liable for a successful defendant's fees.


Common legal, as well as factual, issues may provide nexus among claims to support award of attorneys' fees

Akins v. Enterprise Rent-a-Car Company of San Francisco, Cal.Ct.App., No. A087975, March 20, 2000

In another case raising issues regarding allocation of attorneys' fees among claims where fees are available for only some claims, a California Court of Appeal has held that a common legal issue among claims may support fees for a claim for which fees might otherwise not be available. The plaintiff was successful on one of its claims, but unsuccessful on another, under a statute providing for attorneys' fees. The Court held that a common legal issue–the application and interpretation of the statute on which there was no case law to guide counsel–was sufficient to link the legal work on the non-compensable claim to that for which compensation was available to support a recovery of fees on the otherwise non-compensable claim.


Party may obtain relief from otherwise final fee award if underlying judgment is reversed

California Medical Association, et al. v. Shalala, et al., 9th Cir., No.98-56134, March 22, 2000

The Ninth Circuit has ruled that, even though the defendant had paid and not appealed an attorneys' fee award, when the underlying judgment was appealed and reversed, the defendant could seek and obtain relief from the fee award under Federal Rule 60. Although the District Court had ruled that Rule 60 did in fact apply, it refused to vacate the fee award on equitable grounds because it held that the defendant had filed its appeal on the merits for purposes of delay. The Ninth Circuit ruled that the failure to vacate the award was an abuse of discretion since the defendant's appeal was successful.


Employee exonerated by jury of sexual harassment charges can recover legal fees from employer who settled prior to trial

Jacobus v. Krambo Corporation, Cal.Ct.App., A087995, March 3, 2000

A California Court of Appeal has held that California Labor Code Section 2802 requires an employer, who settled a sexual harassment charge before trial, to pay the legal fees of the employee who was accused of the sexual harassment at issue but successfully defended the sexual harassment charge at trial. The Court viewed its holding as simply an extension of the general California rule that requires employers to indemnify employees for acts undertaken within the scope of their employment and used the traditional analysis of the doctrine of respondeat superior. The Court went beyond what either the plaintiff or defendant had argued and held that, for an employee to be entitled to indemnity, it is not necessary that the charges against the employee be unfounded. The Court further held however that the employer was not required to pay the legal fees incurred by the employee in enforcing the indemnity obligation.

Comment: The jury had found that the acts complained of were not sexual harassment (and were therefore not per se outside the scope of employment.) In reaching its conclusion that the defendant's conduct was "within the scope of employment," the Court made a number of interesting statements, reflecting its views of the mores of today's office. Among other things, the Court concluded that the risk that one worker may accuse another of sexual harassment to deflect an adverse performance review is a risk inherent in employment and that the mutual exchange of sexually explicit materials (part of the conduct complained of) was broadly incidental to the parties' employment, thereby entitling the plaintiff to indemnity under Section 2802.


Law firm not entitled to reimbursement for attorneys' fees expended in successfully defending against its former client's malpractice claim

Channel Lumber Co., Inc. v. Porter Simon, et al., Cal.Ct.App., No. C029576, March 2, 2000

A California Court of Appeal has held that a law firm which successfully defended itself against its former client's malpractice claim was not entitled to recover the attorneys' fees expended as indemnity under California Corporations Code Section 317. Section 317 requires a corporation to indemnify its agents who successfully defend claims brought against them arising out of their acts as "agents" of the corporation. The Court concluded that, while trial attorneys are agents of their corporate clients for some purposes, they are also independent contractors for much of what they do, including the types of actions for which the plaintiff had sued the law firm here, and that the purposes of Section 317 would not be served by allowing the law firm to be indemnified.


Substantial award of punitive damages does not eliminate the right to attorneys' fees

Grabinski v. Blue Springs Ford Sales, Inc., et al., 8th Cir., Nos. 98-4005/4210, February 16, 2000

The 8th Circuit has ruled, deciding the issue under Missouri state law but relying heavily on federal civil rights law, that the district court did not have the discretion to deny attorneys' fees to the plaintiff just because the plaintiff had won what the district court called a "generous" punitive damages award. The statute in question stated that the trial court "may" award attorneys' fees, which the district court interpreted to mean that it had the discretion to deny fees. The plaintiff had won $210,000 in punitive damages, based on actual damages of $7,835. While denying the defendants' argument that the punitive damages was unconstitutionally excessive, the district court did conclude that it would not 'pad' the punitive damages award with a fee award on top. The Circuit Court concluded that the Missouri Supreme Court would look to 42 U.S.C. Section 1988 and federal civil rights cases for guidance and that accordingly the district court should not have denied the request for attorneys' fees merely because of the sizable punitive damages award.

Comment: The Court may have been concerned about the anomalous position plaintiffs would otherwise be in-they could be denied fees for insufficient success on the merits, but also for too much success on the merits.


Right to recover market rates for in-house counsel's time argued to California Supreme Court

The PLCM case noted below, where the California Supreme Court is being asked to decide whether a prevailing party is entitled to recover market rates for the time of in-house counsel in litigation, has been argued to the California Supreme Court and a decision should be rendered within 90 days.


Long-hour days part of a litigator's job

Rosenthal v. Long-term Disability Plan of Epstein, Becker & Green, C.D.Cal., No. 98-4246

A federal judge has ruled that a litigator must be able to work sixteen and even more hours in a day on occasion and, if unable to do so because of her health, she is "disabled." Thus, the lawyer was entitled to recover under ERISA for the bad faith denial of benefits.

Comment: Presumably the Court would reject the notion proffered by some in the legal bill auditing world that lawyers cannot work productively (and therefore should not be entitled to recover legal fees for) more than eight hours in a day.


Supreme Court again rejects effort by successful defendant to recover attorneys' fees

Pacific Lumber Co., et al. v. Marbled Murrelet, et al., U.S. Supreme Court, No. 99-598, January 18, 2000

In what environmentalists hope reflects a clear message from the U.S. Supreme Court, the Court let stand a ruling of the Ninth Circuit holding that attorneys' fees are not recoverable by defendants under the Endangered Species Act merely because they were successful in defeating the plaintiff's claims. Instead, they must show that plaintiff's lawsuit was frivolous, unreasonable or without foundation.

Comment: Considering the frequency with which the Supreme Court overrules the Ninth Circuits' "liberal" decisions, the Court would appear to feel strongly about this issue.


Expert witness fees not recoverable as attorneys' fees nor as "necessary expenses" of collection under contractual attorneys' fees clause

First Nationwide Bank v. Mountain Cascade, Inc., Cal.Ct.App., No. A085802, January 24, 2000

Expert witness expenses are commonly sought by winning parties under statutory and contractual attorneys' fees provisions. However, a California Court of Appeals has ruled that they are not recoverable as attorneys' fees, nor as costs (because expressly prohibited as such by California Code of Civil Procedure Section 1033.5), nor as "necessary expenses" of the collection effort unless they were specially pleaded and proven at trial.

Comment: The California Courts of Appeals are split on this issue, but First Nationwide appears to reflect the majority view. The California Supreme Court has ruled in a case under the Fair Employment and Housing Act that expert witness fees were not recoverable under that statute. This is an important issue because expert witness fees are often very large expenses and, in certain types of complex cases, where the plaintiffs are not funding the litigation, the prospect of not recovering expert witness expenses may have a major impact on the ability of plaintiffs' lawyers to take the cases.


Award of attorneys' fees not required after improper removal to federal court

Valdes v. Wal-Mart Stores, Inc., 5th Cir., No. 99-25019, January 12, 2000

The Fifth Circuit has ruled that, under 28 U.S.C. Section 1447(c), a district court has discretion not to award attorneys' fees for an improperly removed case. Further noting that the defendant's subject state of mind, i.e., motivation in attempting removal, is irrelevant, but that the court needed to consider the objective merits of the defendant's case at the time of the removal, the Court then concluded that the defendant had objectively "reasonable" grounds to seek removal and upheld the District Court's refusal to award fees as within its discretion.


Supreme Court to decide whether non-party corporate officer can be made liable for corporate defendant's obligation to pay attorneys' fees to prevailing plaintiff

The United States Supreme Court has agreed to review the Ohio Cellular Products case discussed below, which held that a corporate officer could be made liable for attorneys' fees awarded against a corporate defendant even though the officer was not a party to the lawsuit. Nelson v. Adams, No. 99-502, November 29, 1999.


Lawyer's violation of Rules of Professional Conduct may–but need not automatically–result in forfeiture of attorneys' fees

Pringle v. La Chapelle, Cal.Ct.App., No. B125935, July 28, 1999

The California Court of Appeals has ruled that, while a violation of the Rules of Professional Conduct may negate the right to attorneys' fees, the forfeiture is not automatic. The client sought to overturn on appeal a judgment for attorneys' fees, arguing that the attorney had failed to obtain proper consents to the representation of clients with conflicting interests. The Court ruled that not every violation by an attorney of the Rules of Professional Conduct prevents the recovery of fees by the attorney, but only those which amounted to a "serious" violation of the attorneys' ethical obligations and that the record on appeal was inadequate to establish that a serious violation had taken place.


Victory at District Court level not sufficient to establish that government's position "substantially justified" under Equal Access to Justice Act

United States v. Hopkins, et al., 9th Cir., Nos. 97-55642, 97-55650, July 20, 1999

The Ninth Circuit has ruled that the government's prevailing in its position at the District Court level does not alone establish that its position was "substantially justified" under the Equal Access to Justice Act so as to avoid the payment of attorney's fees to the claimants in a forfeiture action. The Court also held, however, that there was no evidence of bad faith on the government's part, nor of any of the other factors which would justify paying the attorneys' fees sought at "market rates," so the claimants' recovery was limited to the EAJA limit of $125 per hour, adjusted for the cost of living.


California's settlement offer/cost shifting statute can result in both the plaintiff and defendant recovering attorneys' fees

Scott Co. of California v. Blount, Inc., Cal. Supr. Ct., No. S057126, July 19, 1999

The California Supreme Court has held that where a plaintiff is entitled to recover its attorneys' fees as the prevailing party, but recovers less than the amount offered by the defendant in an offer under Code of Civil Procedure Section 998, the California analog to Federal Rule 68, the plaintiff is entitled to recovery of its attorneys' fees for the period prior to the Section 998 offer, but that the defendant is entitled to its attorneys' fees and costs (and its expert witness fees) for the period after the Section 998 offer. The net effect in Scott was that the "winning" plaintiff recovered damages, and its pre-998 offer costs and attorneys' fees, totaling approximately $669,000, and the "losing" defendant recovered attorneys' fees, costs and expert witness fees of approximately $881,635.


Government must produce time records for review when seeking fees

FDIC v. Bender, et al., D.C.Cir., No. 98-5458, July 16, 1999

The Court of Appeals for the D.C. Circuit has ruled that, even though the District Court could accept summaries of time spent by government lawyers as the basis for an award of attorneys' fees, it was reversible error not to require the government to produce the underlying time records for inspection by the parties against whom the government was seeking to recover its fees. The Court further held that it was improper to award the FDIC $10,000 in fees for the work of its inhouse counsel because the time was insufficiently documented. On remand the District Court had to determine the approximate amount of time devoted by the inhouse counsel, the appropriate rate, and that the time made a substantial contribution to the case, as distinct from merely being for acting as liaison counsel with the Department of Justice attorneys who handled the litigation for the agency.

Comment: When taken in conjunction with the recent California case holding that inhouse counsel can recover fees at market rates (see the PLCM Group case discussed below), it appears that we will be seeing more claims for fees for the work of inhouse counsel in both the private and public sectors. It will also mean that inhouse counsel will be keeping time records to support fee claims (much to the consternation of many lawyers who went inhouse precisely because they were tired of the required tracking of time in private law firms.)


Supreme Court resolves effective date of attorneys' fees rate limitation in Prison Legal Reform Act

Martin, et al. v. Hadix et al., U.S. Supreme Court, No. 98-262, June 21, 1999

Resolving an issue that has split the Circuit Courts, the United States Supreme Court has ruled that the attorneys' fees rate limitation under the Prison Legal Reform Act applies to services rendered after, but not before, the effective date of the Act, regardless of when the order for attorneys' fees is entered. The lower courts had dealt with the issue in varying ways, some finding that the Act did not apply to pending cases at all, some looking to whether the services were rendered before or after the effective date of the Act, and some looking to when the order awarding fees was entered in relation to the effective date of the Act.

The Court rejected the defendants' argument that the limit should apply to all fee awards--regardless of when the services were rendered--entered after the effective date of the Act, finding a lack of Congressional intent to make the Act's fee limitations retroactive.

However, the Court also rejected the plaintiffs' argument that the rate limits only applied to cases filed after the Act's effective date, concluding that, even though they were representing parties in pending litigation, counsel had the option, once the Act became effective, to terminate their services if they were unwilling to be bound by the Act's limitations.


Parties entitled to recovery of attorneys' fees for in-house counsel at market rates

PLCM Group, Inc., v. Drexler, Cal.Ct.App., No. B110667, May 27, 1999

A California Court of Appeal has held that parties are not only entitled to recover attorneys' fees for work done by in-house counsel who actively litigate the case, but also that they are entitled to recover the fees at prevailing market rates, not merely to recover the actual cost to the client of the in-house counsel's services. The major rationale for the Court's decision was the difficulty inherent in determining the actual cost of the in-house services to the client.

The Court also upheld the award of $61,050 in fees even though the jury award was only just over $10,000, noting that the defendant's approach to the litigation had contributed to the amount of time the plaintiff was forced to expend on the case and that, as long as the fees were reasonable on the record and supported by the evidence, it was irrelevant that the requested fees exceeded the amount of the jury verdict.

(Update: Case argued to California Supreme Court. See above.)


Successful defendants under the ADA entitled to attorneys' fees only if plaintiff's claim was frivolous

Bruce v. City of Gainesville, Georgia, 11th Cir., No. 98-9171, May 28, 1999

Agreeing with the Seventh and Ninth Circuits, the Eleventh Circuit has ruled that attorneys' fees are recoverable by a successful defendant in a lawsuit brought under the Americans with Disabilities Act only when the plaintiff's claim was "frivolous, unreasonable or groundless," essentially adopting the rule applied by the United States Supreme Court for cases brought under Title VII of the Civil Rights Act.


Fee award under California Fair Employment and Housing Act belongs to client not attorney absent agreement to the contrary

Flannery v. Prentice, et al., Cal.Ct.App., No. A083668, May 21, 1999

A California Court of Appeal has held that, under the provisions of the California Fair Employment and Housing Act, an award of attorneys' fees belongs to the client, not the attorney, absent an agreement to the contrary. The Court noted that the failure to have a written fee agreement was a violation of Business & Professions Code Section 6147 and felt that it was not unreasonable to expect the lawyers to protect themselves through "the modest step of securing a proper agreement with the client."

While a violation of Section 6147 leaves the lawyers with a quantum meruit remedy, the Court was not inclined to help them further. However, the lawyers were not out of luck--the Court left open the possibility that, on remand, the lawyers could prove the existence of an oral agreement with the client providing that they were entitled to some or all of the fee award.


Failure by class action defendant to communicate intention to provide full relief sought by plaintiff renders defendant liable for attorneys' fees even though litigation did not provide benefit to the plaintiff class

McElwaine v. U.S. West, Inc., 9th Cir., Nos. 97-16306, 98-15732, May 10, 1999

In a class action under ERISA, the Ninth Circuit has ruled that, even though the defendant was in the process of providing the full relief being sought in plaintiff's lawsuit at the time it was filed and therefore the plaintiff did not confer any substantial benefit on the class by the filing and prosecution of the lawsuit, the defendant's failure to be forthcoming about its intentions and provide adequate information to the plaintiff to assure her that the requested relief would be provided, rendered the defendant liable for the plaintiff's attorneys' fees. The Court further ruled, however, that plaintiff could recover her fees only for the time up to when the defendant ultimately did provide the necessary information to the plaintiff and not thereafter (but that she was entitled to her attorneys' fees on appeal.)


Failure to contact defendant to try and settle claim before filing suit justifies reduction of attorneys' fee award

Spegon v. The Catholic Bishop of Chicago, 7th Cir., No. 98-1240, April 27, 1999

The Seventh Circuit has ruled on a number of legal issues, many of which come up frequently in attorneys' fee litigation. First, the Circuit Court affirmed the District Court's reduction of the lodestar for the plaintiff's failure to contact the defendant prior to filing suit to try and settle the case. The Court also addressed various billing rate issues, concluding that decisions granting fees to the same lawyer in other cases were relevant, but not binding, on the question of what the lawyer's "market rate" was and that, while a lawyer's actual billing rate was presumptively the appropriate market rate to apply, a lawyer with a totally contingent-fee practice had no "actual" billing rate and could not simply rely on his own assertion of the appropriate market rate for his services. The Court further held that, while time for preparing the attorneys' fee motion was itself compensable, the number of hours sought had to be reasonably related to the amount of time spent on the merits of the case. The Court also ruled, as have many other courts, that time spent on secretarial or clerical tasks was not compensable, nor was time spent on other tasks that were "non-professional" in nature.


Refusal to mediate in front of judge's law clerk cannot serve as basis for reduction of attorneys' fees award

Connolly v. National School Bus Service, Inc., et al., 7th Cir., No. 98-1679, April 28, 1999

While affirming the District Court's analysis and reduction of plaintiff's attorneys' fees request in every other respect, the Seventh Circuit reversed the District Court's award of attorneys' fees because the District Court relied in part on the plaintiff's lawyer's refusal to participate in a mediation by the judge's law clerk as a justification for reducing the award from the amount sought. While appearing to agree with the District Court regarding the nature of plaintiff's tactics that justified the reduction in the attorneys' fees award, the Circuit Court also ruled that requiring parties to mediate in front of the judge's law clerk was an improper delegation of the Court's power to conduct settlement conferences.

Comment: The Circuit Court was plainly concerned about a number of issues that arise with the prospect of parties, on pain of having attorneys' fees awards jeopardized, being directed to mediate cases in front of law clerks. It did not address the issue of whether a refusal to mediate a case in front of an independent mediator, or as part of a formal Court-operated mediation program (which are becoming very common), would qualify as "dilatory tactics" justifying a reduction of attorneys's fees.


Plaintiff in alleged SLAPP suit remains liable for attorneys’ fees even though entitled to dismiss suit while SLAPP motion under submission

Kyle v. Carmon, Cal. Ct. App., No. C029072, April 28, 1999

In another case under California’s SLAPP statute, being copied or considered in many states and designed to allow parties to force dismissals of lawsuits designed to chill First Amendment rights and recover their attorneys’ fees in so doing, a California Court of Appeals has ruled that a party can dismiss its alleged SLAPP suit while the statutory motion to strike the suit is still under submission, but the party remains liable for the opponents attorneys’ fees under the statute.


Sole shareholder of plaintiff corporation found liable for attorneys’ fees in patent case based on inequitable conduct even though not named as a party in the litigation

Ohio Cellular Products Corporation, et al., v. Adams USA Inc., et al., Fed. Cir., No. 98-1448, April 23, 1999

The Federal Circuit Court of Appeals has held that the sole shareholder of a plaintiff corporation could be made liable for the attorneys' fees of the successful defendant in the litigation, through being added as a third-party defendant, over two years after the original judgment in the case and a year after the defendant's entitlement to attorneys' fees was determined. Even though the shareholder was not a party to the litigation at any time through the attorneys' fees hearing, the Circuit Court affirmed the District Court's finding that all the requisite elements required by Federal Rule of Civil Procedure 15 were present for adding the shareholder as a party through amending the judgment, and that the delay was not prejudicial to the shareholder who was found to be personally involved in the inequitable conduct justifying the attorneys' fees and also to have been in control of the litigation.

(Update: The U.S. Supreme Court has granted certiorari in this case. See above.)


Circuit Court decisions limit District Court's powers under Rule 11

 Court cannot award attorneys’ fees under Rule 11 absent noticed motion

 Court cannot retain jurisdiction under Rule 11 to enter sanctions after case dismissed

Forbes v. Merrill, Lynch, Pierce, Fenner & Smith, 2d Cir., No. 98-7649, April 22, 1999

The Second Circuit reversed an award to the defendant of $25,000 in attorneys’ fees entered by the District Court under Rule 11 without a filed motion by the defendant. While the Court could have entered other types of sanctions on its own motion, attorneys’ fees to an opponent are only available, the Circuit Court ruled, on a motion filed by the party seeking the attorneys’ fees. The Court also noted that Rule 11 required the party against whom sanctions were potentially to be awarded have notice of the specific instances that were alleged to be Rule 11 violations.

Woodward, et al. v. STP Corp., et al., 11th Cir., No. 97-6581, March 29, 1999

The District Court, after denying plaintiff's motion to remand to state court, granted plaintiff's request for a dismissal, but retained jurisdiction to award attorneys' fees to defendants if plaintiff's counsel sued the same defendants again in a different forum. The 11th Circuit held that the District Court's attempt to retain jurisdiction was improper and could not be justified under Rule 11, i.e., that only the court in which the subsequent filing took place could enter such sanctions.


General information in legal bills is not within the attorney-client privilege and is therefore discoverable, but not information regarding nature of research undertaken or legal advice given

Chaudhry, et al. v. Gallerizzo, et al., 4th Cir., No. 98-1024, April 5, 1999

Affirming the propriety of the production of redacted legal bills, the 4th Circuit ruled that general billing information and records are not privileged, but that specific information in billing descriptions indicating the nature of research undertaken or advice given is within the attorney-client privilege and therefore not discoverable. The Court further rejected the plaintiffs' argument that the "crime/fraud" exception to the attorney-client privilege required production of unredacted bills because the plaintiff failed to make a preliminary evidentiary showing to justify application of the exception.


Obstinacy has its price--1st Circuit affirms award of prejudgment interest of $868,000 plus attorneys’ fees

Fajardo Shopping v. Sun Alliance, 1st Cir., No. 98-1649, February 3, 1999

Summary: Affirming the application of Puerto Rico's Rules of Civil Procedure, which mandates an award of attorneys' fees and interest when one of the parties or its counsel has acted "obstinately" or "frivolously" in the conduct of litigation, the First Circuit affirmed the District Court's finding that the insurance company defendant's conduct of the litigation was "unreasonably adamant" and "stubbornly litigious," justifying an award of approximately $868,000 in prejudgment interest plus attorneys' fees.


Insurer compelled to pay defense costs has the burden of proof as to the reasonableness of the fees and expenses paid

American Motorists Insurance Company v. Superior Court (Montrose Chemical Corporation of America), Cal Ct. App., No. B124087, December 18, 1998

The carrier, rather than the insured, has the burden of proof as to the reasonableness of the fees and expenses reimbursed by the carrier under the duty to defend where the carrier had previously been ordered to pay the defense costs and then sought a determination that the amount it had paid was unreasonable. The Court rejected the argument that the insured had to prove the reasonableness of the fees, ruling that the insurer was the party seeking affirmative relief at this point and that therefore the burden of proof, essentially to prove that the defense costs were unreasonable, was on the insurer. The Court further held that, where, as here, payment by the insurer had been compelled rather than voluntary, the carrier' s right to reimbursement for allegedly excessive or unnecessary fees was a claim for equitable restitution, not a claim for damages.


Failure to require allocation of fees in billing entries is abuse of discretion

Suiter v. Mitchell Motor, 10th Cir., Nos. 96-5154, 96-5159

The District Court's failure to require the successful plaintiff to allocate the time in billing entries relating to different defendants was an abuse of discretion and required reversal of the attorneys' fees award.


Chicken Stomps Dinosaur:  San Diego Chicken gets attorneys' fees for defending copyright infringement suit by Barney

Lyons Partnership, L.P., v. Giannoulas, et al., ND Tex., NO. 4:97-CV-852-A, September 4, 1998

In a case closely watched by those advancing the theory that chickens evolved from dinosaurs, a federal District Court in Texas has awarded $180,000 in attorneys fees and expenses to the San Diego Chicken for successfully defending a copyright infringement lawsuit brought by Barney. The Court found that, while the suit was not brought in bad faith or frivolous, some of the arguments made in support of plaintiff's claims were unreasonable, including the plaintiff's refusal to recognize that defendants' use of the Barney character was a parody, and that awarding attorneys' fees would advance the purposes of the Copyright Act in encouraging creativity.


Conflict of interest for class counsel does not bar their ultimately sharing in fees from settlement of class action

Linney v. Cellular Alaska Partnership, 9th Cir., No. 97-16637, August 21, 1998

Although the original class counsel was found, in a hearing to approve the original settlement, to inadequately represent the class of plaintiffs because of a conflict of interest (it had made a deal with the chief defendant to be hired to monitor the settlement after it was approved), the Ninth Circuit has upheld the District Court's ultimate determination that, because new class counsel was appointed that adequately represented the class, a new settlement could provide for attorneys' fees for the original lawyers.


The United States, but not private parties, can recover reasonable attorneys' fees as "response costs" under CERCLA

United States v. Chapman, 9th Cir., No. 97-15215, July 2, 1998

According to the Ninth Circuit, the federal government can recover its attorneys' fees as part of its response costs under CERCLA, even though a private party could not recover attorneys' fees in a private cost recovery action. The Court agreed with the Second Circuit and several federal District Court decisions in reaching its conclusion.

Comment: The Court went on to hold that the District Court had to award "reasonable" attorneys' fees, not simply the actual attorneys' fees expended, and reversed the award of $400,000 in fees ( the other response costs totaled $34,000) for a determination by the District Court of the reasonable fees under the standards of Hensley v. Eckerhart, 461 U.S. 424 (1983) the seminal United States Supreme Court case on attorneys' fees in civil rights cases.


Two out of three Circuits agree–Prison Legal Reform Act's limitation on hourly rates applies to cases pending at time of the Act's effective date

Madrid v. Gomez, 9th Cir., Nos. 96-17277, 97-16237, July 2, 1998

Joining the Fourth Circuit (but disagreeing with the Sixth), the Ninth Circuit has ruled that the severe limitation on hourly rates for attorneys conducting prison litigation covered by the Prison Legal Reform Act of 1995 applies to cases pending on the effective date of the Act. The Court thus limited the fees to a maximum of $112.50 per hour for cases in the Northern District of California. The District Court, which had ruled that the Act did not apply to pending cases, had awarded fees at rates up to $305 per hour, consistent with the Court's conclusion as to the market rates for the personnel involved.


... but Third Circuit rules that fees are recoverable under the PLRA for the time spent in seeking fees

Hernandez v. Kalinowski, 3rd Cir., No. 97-1734, July 13, 1998

Following the general rule in attorneys' fees cases, the Third Circuit ruled that successful plaintiffs were entitled to recover attorneys' fees for the time spent in seeking their attorneys' fees under the PLRA. However, the Court rejected the argument that the plaintiffs were entitled to the rates for court-appointed counsel in capital cases.


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