Monday, July 8, 2019

The Bounty Hunters Get Rebuffed

The United States Court of Appeals for the District of Columbia Circuit affirmed the dismissal of claims brought by a law firm under a "novel theory." 

"Pecunia non satiat avaritiam, sed inritat” translates from Latin to  English as “money doesn’t satisfy greed; it stimulates it.” This case teaches that money also stimulates legal artifice. For over one hundred and fifty years, the False Claims Act (FCA) has imposed civil liability on anyone who defrauds the federal government of money or property. See generally Act of March 2, 1863, ch. 67, 12 Stat. 696 (1863) (codified as amended at 31 U.S.C. §§ 3729 et seq.). A third party—a relator—may bring an FCA lawsuit on behalf of the government and collect a substantial bounty if he prevails. See 31 U.S.C. § 3730(b), (d). Today we review a relator’s novel theory of FCA liability.

The law firm Kasowitz Benson Torres LLP (Kasowitz) alleges that a handful of large chemical manufacturers violated the Toxic Substances Control Act, Pub. L. No. 94-469, 90 Stat. 2003 (1976) (codified as amended at 15 U.S.C. §§ 2601 et seq.) (TSCA), by repeatedly failing to inform the United States Environmental Protection Agency (EPA) of information regarding the dangers of isocyanate chemicals. Kasowitz claims the defendant-chemical manufacturers’ failure to disclose and subsequent actions deprived the government of property (substantial risk information) and money (TSCA civil penalties and contract damages). Kasowitz demands billions of dollars in damages, even though the government openly supports the defendants. The district court dismissed its lawsuit. Kasowitz now appeals, asking us to become the first court to recognize FCA liability based on the defendants’ failure to meet a TSCA reporting requirement and on their failure to pay an unassessed TSCA penalty. We decline the invitation and affirm the dismissal.

(Mike Frisch)

July 8, 2019 in Billable Hours | Permalink | Comments (0)

Wednesday, July 3, 2019

Block Billing Not Prohibited

The District of Columbia Court of Appeals reversed and remanded an appeal involving court-ordered fees in a guardianship matter. 

Rosenau LLP represented Jennifer Brown, the daughter of Vivian N. Brown, in her successful attempt to be appointed her mother’s guardian. In 2015, Rosenau LLP petitioned the court under Super. Ct. Prob. R. 308 and D.C. Code §§ 21-2047, -2060, for an interim award of fees from Vivian N. Brown’s assets in the amount of $25,358.18. The firm attached timesheets listing its attorneys’ entries of time worked on the case, including brief descriptions of the work and the rate at which that time was charged. This first petition was denied without prejudice by the trial court (the Hon. Natalia M. Combs Greene) after the estate’s conservator responded, inter alia, that more than one Rosenau attorney was billing for some of the same work in the petition. The court noted that, in addition to double billing, some of the tasks in the firm’s petition were bundled such that certain related and unrelated tasks were billed together (block or bundled billing).

The firm subsequently filed an amended petition in which it lowered the amount requested, corrected the double billing, and “earnest[ly] attempt[ed]” to separate unrelated bundled tasks. The trial court (the Hon. Kaye K. Christian), however, denied payment of the full amount requested. The court ruled that each “fee petition billing entr[y] regarding meetings, telephone conferences, or other written correspondence” must list “the subject matter of the correspondence, the person with whom Petitioner is corresponding, and said person’s relevance to the well[-]being of the ward.” The court concluded that more than 70 entries were deficient on this basis. The court also ruled that “‘block-billing,’ ‘aggregate’ or ‘blended’ time claims [are] forbidden because time records lumping together multiple tasks[] make it impossible to evaluate their reasonableness” (internal quotation marks and alterations omitted). The court concluded that an additional 17 entries were deficient on this basis. In all, the court disallowed entries from the amended petition totaling $11,325.41 out of $22,412.95 in fees requested. The court then granted the remainder of the requested fees and costs without engaging in any additional analysis. The firm filed a consent motion for reconsideration, which the court denied. This appeal followed.

The merits

The trial court found that Rosenau LLP’s fee petition failed to meet the threshold requirement of Rule 308(b)(1) in that it lacked the requisite detail and impermissibly relied on block billing. Although it may be prudent for individuals seeking compensation under Rule 308 to set forth tasks in as much detail as possible, we see no requirement under our probate statute, our probate rules, or our case law that compelled the court to deny fees for the reasons it provided. Rule 308 asks for a “reasonabl[y] detail[ed]” petition to aid the trial court’s ultimate assessment: whether the fees requested by attorneys and other individuals who perform work for the estate are reasonable...

Likewise, Rule 308 does not plainly prohibit all “bundling,” and we have never interpreted it to convey such a prohibition. We see no reason to impose such a prohibition now, so long as the description of bundled tasks is sufficiently detailed to permit a court to assess the reasonableness of the time billed. We agree, however, that entries bundling time so vaguely as to make a reasonableness determination impossible may be appropriately disallowed.

Associate Judge Easterly authored the opinion. (Mike Frisch)

July 3, 2019 in Billable Hours | Permalink | Comments (0)

Wednesday, June 19, 2019

No Fee If Ethics Breach

The claim to disgorge legal fees was reinstated by the New York Appellate Division for the Second Judicial Department

“An attorney who violates a disciplinary rule may be discharged for cause and is not entitled to fees for any services rendered” (Jay Dietz & Assoc. of Nassau County, Ltd. v Breslow & Walker, LLP, 153 AD3d 503, 506; see Matter of Montgomery, 272 NY 323, 326; Saint Annes Dev. Co. v Batista, 165 AD3d 997, 998; Doviak v Finkelstein &Partners, LLP, 90 AD3d 696, 699; Quinn v Walsh, 18 AD3d 638; Brill v Friends World Coll., 133 AD2d 729). A cause of action for forfeiture of legal fees based on an attorney’s discharge for cause due to ethical violations may be maintained independent of a cause of action alleging legal malpractice or breach of fiduciary duty, and does not require proof or allegations of damages (see Jay Dietz & Assoc. of Nassau County, Ltd. v Breslow & Walker, LLP, 153 AD3d at 506; Ulico Cas. Co. v Wilson, Elser, Moskowitz, Edelman & Dicker, 56 AD3d 1).

Here, the complaint seeks forfeiture of legal fees paid to the defendant between January 2007 and August 2009 in connection with the plaintiff’s decedent’s claim against Wilson for retained earnings. The complaint alleges that the decedent retained the defendant in January 2007 to recoup the retained earnings from Wilson, that the defendant also represented and performed legal work for Wilson on that issue between 2008 and 2009, that the interests of the decedent and Wilson on that issue were adverse, and that the dual representation violated rule 1.7 of the Rules of Professional Conduct (22 NYCRR 1200.0). The complaint further alleged that, as a result of its previous dual representation, the defendant was disqualified from representing the decedent’s estate in a 2009 turnover proceeding against Wilson to collect the retained earnings. Contrary to the determination of the Supreme Court, these allegations are sufficient to state a viable cause of action
to disgorge legal fees (see Jay Dietz &Assoc. of Nassau County, Ltd. v Breslow & Walker, LLP, 153 AD3d at 506).

June 19, 2019 in Billable Hours | Permalink | Comments (0)

Thursday, May 23, 2019

No Fee Recovery For Self-Representation In Connecticut

The Connecticut Appellate Court has held that a self-represented lawyer or law firm may not recover attorneys fees in litigation.

The attorney had received an award in arbitration

On March 3, 2014, the plaintiff petitioned the legal fee resolution board of the Connecticut Bar Association (board) to resolve a fee dispute that had arisen between the parties. On December 24, 2014, a panel of three arbitrators found that the plaintiff was owed $109,683 in fees for its representation of the defendant. The plaintiff subsequently filed an application to confirm the arbitration award in the Superior Court, which the court, Scholl, J., granted on March 17, 2015. The defendant appealed to this court, which affirmed the trial court’s judgment confirming the arbitration award, and our Supreme Court denied the defendant’s petition for certification to appeal. See Rosenthal Law Firm, LLC v. Cohen, 165 Conn. App. 467, 473, 139 A.3d 774, cert. denied, 322 Conn. 904, 138 A.3d 933 (2016). Attorney Edward Rosenthal, the sole member of the plaintiff, represented the plaintiff throughout the proceedings before the board and in the trial and appellate courts.

The attorney then sued for his fees relying on the retainer agreement

the plaintiff claimed that it had incurred $59,600 in ‘‘legal fees’’ in connection with the arbitration and related court proceedings, which reflected the time spent by Rosenthal on these matters.

The trial court relied on precedent

The plaintiff’s sole claim on appeal is that the trial court erred in determining that the law barring self represented non attorney litigants from recovering statutory attorney’s fees also precludes a self-represented law firm from recovering contractual attorney’s fees.

The court here rejected the suggestion that the precedent was dictum

The court intentionally took up and analyzed the issue and concluded that the general rule announced in Lev would bar the plaintiff attorneys in Jones from recovering attorney’s fees. Although the court discussed the issue only briefly, there is nothing in its opinion or the record to suggest that its conclusion was less carefully reasoned than it might otherwise have been. In sum, the court’s conclusion cannot reasonably be characterized as a merely casual, passing comment made without analysis or due consideration of conflicting authorities. It is clear that the court made a deliberate decision to resolve this issue and that it undeniably decided it. Accordingly, the court’s conclusion that self-represented attorney litigants cannot recover attorney’s fees constitutes an alternative holding, not dictum.

A firmly-held view

we need not determine whether the plaintiff’s status as a law firm litigant renders this case materially distinguishable from Jones, which involved attorney litigants. We note, however, that among the courts that have considered these issues in jurisdictions in which self represented attorney litigants are barred from recovering attorney’s fees, the majority agree that there is no meaningful distinction between solo practitioners who represent themselves and law firms that are represented by their own attorneys.

(Mike Frisch)

May 23, 2019 in Billable Hours, Clients | Permalink | Comments (0)

Wednesday, May 22, 2019

Attorney Charged With Unreasonable, Unnecessary Duplicative Fees

The Illinois Administrator has charged an attorney with charging unnecessary and unreasonable fees and dishonesty  in an estate matter.

The clients

 In 2015, Dee ("D.J.) and Jane ("Jane") Newby were a married couple who had three adult children: Elizabeth ("Liz"), William and David. Neither D.J. nor Jane had previously been married.

In 2000, attorney Kevin J. Huck prepared, at D.J.'s and Jane's request, living trust agreements for D.J. and Jane. Both trust agreements provided that D.J. and Jane were co-trustees of the trusts and that upon either one of their deaths, the surviving spouse would become the sole successor trustee of the deceased spouse's trust. D.J. and Jane's living trust agreements also created two sub-trusts, a marital and a family trust, which the grantors funded with assets from his or her trust upon the grantor's death.

D.J. and Jane executed the living trust agreements on April 20, 2000.

Between April 20, 2000 and September 2015, some of D.J.'s assets were re-titled or transferred into his trust. Those assets included the couple's residence, which was located in St. Charles, investment accounts at Raymond James investment company, and a life insurance policy issued by Zurich American Insurance ("Zurich"). D.J. also had a life insurance policy with National Education Association ("NEA"), and an Individual Retirement Account ("IRA") at Raymond James, both of which named Jane as the beneficiary.

Enter Respondent

D.J. and Jane were owners of a business involving the breeding and raising of miniature poodles. In or about 2009, Respondent met D.J. and Jane at a poodle-training class. Between 2009 and 2015, they became friends through their shared interest in breeding poodles and traveling to dog shows.

In 2015, D.J. was hospitalized due to a serious illness. Jane sent regular updates to Respondent about her husband’s health condition.

On September 20, 2015, D.J. Newby died at age 75. He was survived by his wife, Jane, who was then 73 years old, and their children Liz, William and David.

At the time of D.J.’s death, D.J.’s and Jane’s assets were valued at $1.2 million. The value of those assets was well below the federal estate tax exemption of $5.43 million and the Illinois estate tax exemption of $4 million, and therefore would not be taxable. D.J.’s estate had no probate assets, and did not require a probate estate to be opened in order to distribute his assets to Jane.

The administration of D.J.’s trust matters included the settlement of D.J.’s credit card bill, obtaining D.J.’s life insurance proceeds from NEA and Zurich (both policies naming Jane as the beneficiary), transferring the proceeds of D.J.’s investment account at the Raymond James investment company to Jane’s trust account, rolling over of D.J.’s IRA to Jane’s IRA, notifying creditors of D.J.’s death and filing D.J.’s will.

Nonetheless

Between October 2015 and December 2015, Respondent informed Jane that in order to protect her assets, she would need to hire him for additional work beyond the administration of D.J.’s trust, which included preparing wills and trusts for Jane and Liz. Respondent also told Jane and Liz that he would need to do additional work to incorporate Liz’s separate dog breeding business. Based on Respondent’s advice, Jane and Liz allowed Respondent to proceed with this proposed work.

At no time did Respondent provide Jane or Liz with a written fee agreement or discuss any hourly rate or flat fee he would charge for this additional work described...above.

At no time did Respondent discuss with Jane or Liz that Joseph would also provide services with respect to the proposed additional work described...above, or the hourly rates that Respondent would charge her for any services Joseph performed.

Between October 2015 and December 2015, Respondent asked Jane to pay him a total of $20,605 as purported legal fees of $20,000 plus purported costs of $605, related to the matters he was handling on her behalf. Jane made three payments during this time totaling $20,605 to Respondent.

At no time between October 2, 2015 and January 20, 2016, did Respondent provide Jane with an invoice outlining the work he claimed he and Joseph did, when they did that work, how long it took them to do it, his or Joseph’s hourly rates, or whether the payments Jane made were advance fees or payment for work already completed.

On January 21, 2016, approximately three-and-one-half months after their initial meeting, Jane and Liz met Respondent at his office to sign the estate plan documents Respondent had prepared for them. At that meeting, and without any notice to Jane, Respondent gave Jane an itemized billing statement for fees and costs totaling $87,302.27 which, in addition to charges at an hourly rate of $595, included a $15,000 flat fee for purported work described as "trusts and corporation" and an overall proposed five percent bonus for his work ($4,157.27). Respondent’s billing statement listed the services Respondent claimed that he and Joseph provided to Jane and Liz between October 2, 2015 and January 20, 2016 relating to the administration of D.J.’s trust, preparation of wills and trusts for Jane and Liz and the incorporation of Liz’s dog-breeding business. Respondent deducted a purported 50 percent discount from the $83,145 (the amount of fees before adding the bonus) he had charged her, and then deducted Jane’s payments towards fees (totaling $20,000) from the remaining balance, which left a total outstanding balance of $25,729.75 (including the five percent bonus).

At no time prior to January 21, 2016, did Respondent inform Jane that he would charge her $595 per hour for the time he claimed to have spent on her matters, of the purported $15,000 flat rate fee or five percent bonus, and the costs incurred in connection with the purported services Respondent claimed to have provided on her and Liz’s behalf.

There are a number of other allegations of false and unreasonable billings, e.g.,

In the January 21, 2016 billing statement, Respondent charged Jane a "flat fee" of $15,000 (which was discounted at the bottom of the billing statement to $7,500) for purported estate planning work related to creating trusts for Jane and Liz and for the incorporation of Liz’s poodle breeding business. But, in addition to the flat $15,000 fee, Respondent also charged Jane $4,763.50 (6.8 hours of his time at $595 per hour for a total of $4,046, and 2.05 of Joseph’s time at $350 per hour for a total of $717.50) for estate planning work related to creating trusts for Jane and Liz. Respondent also charged Jane 1.7 hours of his time (at $595 per hour for a total of $1,011.50) and .4 hours of Joseph’s time (at $350 per hour for a total of $140) for work related to the incorporation of Liz’s poodle breeding business.

Respondent’s hourly charges for work related to creating trusts for Jane and Liz and incorporating Liz’s poodle breeding business were false and unreasonable. Respondent knew that he had had already charged Jane for those services when he charged the $15,000 flat fee that covered those services. Further, Respondent knew that the total fee of $13,415 that he charged Jane ($15,000 flat fee, less 50 percent discount ($7,500), plus charges of $4,763.50, $1,011.50 and $140 equals $13,415) was unreasonable for two simple wills and trusts and the incorporation of a business.

The phrasing of the fee-related allegations

...charging or collecting an unreasonable fee, by conduct including charging Jane $87,302.27, and collecting $20,605 in legal fees for services related to the administration of D.J.'s trust, Jane and Liz's estate planning and incorporation of Liz's business for which the amount of time, labor or difficulty of the work required was exaggerated, not necessary or duplicative, in violation of Rule 1.5(a) of the Illinois Rules of Professional Conduct (2010);

(Mike Frisch)

May 22, 2019 in Bar Discipline & Process, Billable Hours | Permalink | Comments (0)

Tuesday, May 14, 2019

Contingent Fee With Ambiguity Draws Tennessee Censure

From the web page of the Tennessee Supreme Court

The Tennessee Supreme Court has upheld an attorney’s public censure, concluding that the sanction was not arbitrary or capricious and was supported by substantial and material evidence. 

This disciplinary matter arose out of Carlos Eugene Moore’s representation of his client in a personal injury action.  Mr. Moore entered into a contingent fee agreement with his client, which provided that if the client refused to accept a settlement offer that Mr. Moore advised was reasonable and should be taken, the client would be required to pay Mr. Moore the contingency fee “on the basis of that offer” unless waived by Mr. Moore. 

When Mr. Moore received a settlement offer, he advised his client that she should accept the offer, but she refused.   The trial court then granted Mr. Moore’s motion to withdraw from representation of the client, and Mr. Moore filed a series of motions for a lien against his client’s eventual recovery in her personal injury case for fees and expenses “presently owed.”

The hearing panel determined that Mr. Moore’s contingency fee agreement violated the Rules of Professional Conduct because the fee was unreasonable in that it was not contingent on the case’s outcome but rather contingent upon Mr. Moore’s determination that a settlement offer was “reasonable.”  The panel also determined that, in Mr. Moore’s motions to assert lien filed, Mr. Moore violated the Rules of Professional Conduct by seeking an amount in excess of the fee agreement and using an hourly rate, which was not contemplated in the written fee agreement.  Accordingly, the panel imposed a public censure as Mr. Moore’s discipline.  The chancery court, on appeal, upheld the decision of the hearing panel.  Mr. Moore then appealed to the Tennessee Supreme Court. 

In the unanimous opinion authored by Chief Justice Jeff Bivins, the Court agreed with the hearing panel that the contingent fee agreement was ambiguous at best and that, under two possible interpretations, the fee was based on the original settlement offer and not the client’s eventual recovery.  Thus, the fee was unreasonable and violated the Rules of Professional Conduct because the Rules only allow a contingency fee on the outcome of the matter. The Court also agreed with the hearing panel that the contingency fee agreement violated the Rules of Professional Conduct because it gave Mr. Moore a proprietary interest in any settlement offer arising in the case.  The Court determined that the hearing panel’s judgment was supported by evidence that is both substantial and material. As a result, the panel’s judgment was not arbitrary or capricious.  The Court affirmed the judgments of the trial court and the hearing panel imposing a public censure. 

To read the Court’s opinion in Carlos Eugene Moore v. Board of Professional Responsibility, authored by Chief Justice Jeff Bivins, go to the opinions section of TNCourts.gov.

(Mike Frisch)

May 14, 2019 in Bar Discipline & Process, Billable Hours | Permalink | Comments (0)

Monday, May 6, 2019

Ohio Liens In

Also before the Ohio Supreme Court this week

Kisling, Nestico & Redick LLC v. Progressive Max Insurance Company et al., Case no. 2018-0682
Eighth District Court of Appeals (Cuyahoga County)

ISSUES:

  • Does a lawyer’s charging lien give the lawyer the right to be compensated from a settlement resulting from the lawyer’s services and skills provided during pending litigation?
  • Does R.C. 3929.06 bar a tort claimant’s former lawyer from suing a third party’s insurer to enforce a charging lien against a settlement paid by an insurer?

BACKGROUND:
Darvale Thomas was injured in a July 2014 automobile accident in Franklin County. The accident was allegedly caused by Todd Thorton, who was insured by Progressive Insurance. Thomas hired law firm Kisling, Nestico & Redick (KNR) to represent him under a contingent-fee agreement, in which the firm would be paid from the proceeds if it won the case.

After KNR worked on the case for about a year, Progressive notified KNR on June 30, 2015, of an offer to settle the claim for $12,500. KNR states that Thomas was unhappy with the offer and ended the firm’s representation, then hired another attorney. On July 9, KNR informed Progressive that the firm no longer was representing Thomas and asserted that it was entitled to its portion of any settlement based on the fee agreement Thomas signed.

The law firm’s fee was one-quarter of the gross amount of any recovery, and the agreement stated: “Attorney shall have a charging lien upon the proceeds of any insurance proceeds, settlement, judgment, verdict award or property obtained on your behalf.”

Progressive responded that KNR’s only recourse was against Thomas. On July 14, Thomas’ new lawyer informed Progressive that Thomas wanted to negotiate the claim himself. That day, Thomas and Progressive agreed to a $13,044 settlement, and payment was made directly to Thomas.

Law Firm Seeks Payment for Work from Insurance Company
KNR filed a lawsuit in Cuyahoga County Common Pleas Court against Progressive Max Insurance Company, Progressive Southeastern Insurance Company, and Progressive John Doe Companies – headquartered in Mayfield Village – as well as Thomas and Thorton. KNR’s former client – Thomas – didn’t appear or answer the firm’s complaint, and the court entered a default judgment against him for $3,411.48, which he hasn’t paid. In March 2016, Progressive and KNR agreed to dismiss Thorton as a party in the case.

The trial court granted summary judgment to KNR, determining Progressive was notified before the settlement of KNR’s fee agreement with Thomas, yet distributed the settlement proceeds to Thomas without making an effort to protect KNR’s interest.

Progressive appealed to the Eighth District Court of Appeals, which upheld the trial court’s ruling. The insurance company’s appeal to the Ohio Supreme Court was accepted for oral argument.

Insurer Contends It Wasn’t Responsible for Paying Former Law Firm
Progressive argues that a lawyer cannot use a charging lien that is in a contract with a client as a vehicle for separate litigation against a wrongdoer’s liability insurer to recover attorney fees not paid by the lawyer’s former client. Progressive maintains that the Eighth District is the first court in Ohio to make this holding, which the insurer believes is erroneous.

Progressive describes a “charging lien” as an “equitable rule of priority” against any other person or entity claiming a right to part of a “fund” that resulted from the lawyer’s services. Yet, in the insurer’s view, a settlement doesn’t exist until the payment is made in exchange for the claim’s release – and, in this case, the money at that point was with Thomas, not the insurance company. In these circumstances, a law firm can’t recover fees from an insurer, Progressive states.

In addition, Ohio courts have concluded that a charging lien can’t exist in the absence of a court-controlled fund, Progressive argues, but Thomas’ claim resulted in an out-of-court settlement. The insurer contends that the Eighth District was wrong to conclude that the notice KNR made to Progressive of the firm’s lien was all that was needed to allow KNR to pursue its lawsuit against the insurance company. But, Progressive counters, notice alone doesn’t allow enforcement of a charging lien, particularly before a settlement is paid.

The insurer also asserts that R.C. 3929.06 prevents an assignee of possible settlement proceeds, such as a law firm, from suing a third-party insurer in the absence of a final judgment against the insured. Progressive maintains that instead of shifting business risks to a third party, KNR could pursue other methods for resolving fee disputes without litigation or use another type of fee agreement.

Law Firm Maintains Insurer Had Duty to Pay Firm
KNR counters that the Eighth District’s decision isn’t the first in Ohio to recognize an attorney’s right to recover fees in such a manner, and the law firm points back as far as an 1898 Ohio Supreme Court decision (Pittsburgh, Cincinnati, Chicago & St. Louis Ry. Co. v. Volkert). The majority view nationally is that a discharged attorney may recover unpaid legal fees from a wrongdoer, including an insurance company acting on behalf of the wrongdoer, KNR maintains. Having acknowledged the need to protect attorneys from clients that deprive their attorneys from compensation, the Ohio Supreme Court has concluded that attorneys providing legal services and paying their own legal expenses before a client can pay “creates an equitable interest in the client’s property,” the law firm’s brief states.

KNR argues that charging liens are “an active, enforceable right” against one possessing the property – such as an insurance company issuing a settlement – and the possessor has a duty to hold the property and ensure that it is given to the true owner.

In addition, charging liens are enforceable not only against court judgments but also against settlements, KNR states, citing to multiple Ohio and federal court rulings. The law firm also disputes Progressive’s position that it couldn’t pay KNR its portion because the money was already with Thomas. The law firm contends that once a settlement is agreed on, the client’s recovery no longer is in question, and there is a window between the time the settlement is accepted and the time it is paid. If the Supreme Court rules otherwise, KNR stresses that contingent-fee agreements would be undermined because attorneys would have no recourse for obtaining compensation. Given that Progressive knew KNR was entitled to a portion of any settlement when Thomas accepted the settlement, the insurance company was obligated to ensure payment was made to the firm, KNR argues.

Progressive also cannot claim protection under R.C. 3929.06 because it agreed to stand in Thorton’s shoes when the insured was dropped from the case. The statute doesn’t bar a lawsuit against the wrongdoer’s insurance company when the claim is based on the insurer’s own misconduct rather than the company’s status as the insurer, KNR maintains.

Associations Take Stances on Each Side
An amicus curiae brief supporting Progressive’s position has been submitted by the Ohio Association of Civil Trial Attorneys. The Ohio Association for Justice has filed an amicus brief supporting KNR.

- Kathleen Maloney

Docket entries, memoranda, briefs (including amicus briefs), and other information about this case may be accessed through the case docket.

Contacts
Representing Progressive Max Insurance Company et al.: Richard Garner, 614.901.9600

Representing Kisling, Nestico & Redick LLC: Christopher Van Blargan, 330.869.9007

(Mike Frisch)

May 6, 2019 in Billable Hours | Permalink | Comments (0)

Monday, April 22, 2019

Fees Yes, Fraud No

The New York Appellate Division for the First Judicial Department declined to dismiss an excessive fee claim against an attorney but affirmed dismissal of fraud allegations

Plaintiff's fraud claim should have been dismissed because the complaint did not sufficiently plead justifiable reliance upon defendant's claim that it needed an additional $10,000 to continue its work on her lawsuit. In fact, the complaint specifically asserts that plaintiff knew the additional $10,000 legal fee demanded by defendant would not be used for her benefit, but he required it because other clients had not paid him. This admission negates an element of the fraud claim, that plaintiff justifiably relied on the defendant's alleged misrepresentation that "[defendants] needed $10,000 to continue their work [on her case]" (see Shalam v KPMG LLP, 89 AD3d 155, 157-158 [1st Dept 2011]; Havell Capital Enhanced Mun. Income Fund, L.P. v Citibank, N.A., 84 AD3d 588, 589 [1st Dept 2011]).

The claim for excessive legal fees (and the related discussion in the complaint of defendants' alleged breach of fiduciary duty based on the alleged overcharges) was correctly sustained. Plaintiff alleged that "[her] fee bore no rational relationship to the product delivered," and detailed that, in exchange for the $25,000 fee, defendants produced only a draft complaint that was essentially identical to the one that she had presented to them (see Johnson v Proskauer Rose LLP, 129 AD3d 59, 70 [1st Dept 2015]). This claim is not duplicative of the legal malpractice claim, as plaintiff's complaints regarding the over billing were not a direct challenge to the quality of the work but instead a claim that the fee paid bore no rational relationship to the work performed (see Ullmann-Schneider v Lacher & Lovell-Taylor, P.C., 121 AD3d 415, 416 [1st Dept 2014]; Johnson, 129 AD3d at 70). To the extent that the motion court read the pro se complaint as alleging a separate cause of action for breach of fiduciary duty, these allegations are subsumed in the cause of action for excessive attorney fees.

(Mike Frisch)

April 22, 2019 in Billable Hours | Permalink | Comments (0)

Sunday, April 7, 2019

Court Rules Against Attorney In Civil Misappropriation Case That Was Whitewashed In Bar Discipline

The Connecticut Appellate Court affirmed a verdict favoring a former client who had filed a civil claim of misappropriation

The parties’ fee agreement provided for a contingent fee of 40 percent. Id. On June 29, 2004, an arbitration panel awarded Yuille $1,096,032.93 in damages. Id., 153. Parnoff sent an invoice to Yuille that included an attorney’s fee representing 40 percent of the gross settlement proceeds. Id. Yuille objected to the fee and Parnoff subsequently brought an action against Yuille to recover the fee. Id., 154. Parnoff’s action alleged breach of contract, quantum meruit and bad faith. Id., 154–55. Following a trial, the jury found in favor of Parnoff on the breach of contract counts and, thus, did not reach the quantum meruit count. Id., 157–58.

On appeal, this court held that the parties’ fee agreement exceeded the cap contained in General Statutes § 52-251c and, therefore, was unenforceable as against public policy. Id., 169, 172.

After remand

The trial court later rendered judgment for Yuille on the quantum meruit count, which this court affirmed on appeal, concluding that an attorney ‘‘who is barred from contract recovery because of the contract’s failure to comply with the fee cap statute cannot recover under the doctrine of quantum.

For the attorney, things went from bad to worse

In 2013, Yuille commenced the present action alleging that Parnoff had misappropriated funds that had been held in escrow pending resolution of the parties’ fee dispute. The operative amended complaint alleged conversion, statutory theft pursuant to General Statutes § 52-564,4 and breach of fiduciary duty. At the conclusion of the evidence, the court denied Parnoff’s motion for a directed verdict. The jury returned a verdict in favor of Yuille on the counts alleging conversion and statutory theft, and for Parnoff on the count alleging breach of fiduciary duty. The court subsequently rendered judgment for Yuille on the conversion and statutory theft counts in the total amount of $1,480,336.37.

Parnoff then filed the present appeal. Additional facts will be set forth as necessary.

The court rejected the attorney's claims regarding his counsel's withdrawal

Specifically, after noting the complicated history between these parties and the disputed attorney’s fees, the motion indicated that in December, 2016, Parnoff had advised in writing that the law firm was required to obtain his authorization prior to performing any further work on his file. After attending the status conference in which the matter was ordered to trial, Lynch indicated that he repeatedly requested authorization from Parnoff to work on the file; Parnoff, however, did not provide the necessary authorization. Under these circumstances, Lynch and the law firm requested permission to withdraw their appearance in this matter.

He thus was the author of his own travails

we disagree with Parnoff that the court abused its discretion by ordering this matter to trial. It is important to note that six years had elapsed between June 29, 2004, the date that Yuille received her arbitration award in this matter; Parnoff I, supra, 139 Conn. App. 153; and July 26, 2010, the date that Parnoff misappropriated the funds that had been placed in escrow pending resolution of the parties’ dispute. Another six and one-half years had passed before the court’s January 26, 2017 order directing that this matter was scheduled for trial. During this time, in addition to Parnoff I, supra, 147, and Parnoff II, supra, 163 Conn. App. 273, Yuille had also filed a grievance against Parnoff, alleging that he had violated the Rules of Professional Conduct by transferring and commingling the funds; this proceeding resulted in a formal reprimand being issued against Parnoff. Disciplinary Counsel v. Parnoff, 324 Conn. 505, 511, 513, 152 A.3d 1222 (2016). Moreover, Parnoff, an attorney with an active law license, as noted by the trial court, was a party to all of this litigation and would have had firsthand knowledge of the underlying proceedings and complicated history involving the disputed funds.

And rejected his "inconsistent verdict" contentions

It was a reasonable hypothesis for the jury to believe that at the time Parnoff converted the funds in 2010, he was no longer acting as Yuille’s attorney. Accordingly, because the jury’s answer to the interrogatory can be harmonized with the verdict, Parnoff cannot prevail on his claim that the verdict is irreconcilably inconsistent.

Notably (and I would have to say lamentably) Disciplinary Counsel v. Parnoff has the bar discipline story which involved the taking of the funds after the attorney had won the trial verdict that was reversed on appeal

“[The defendant] held the funds in escrow continuously [until] July 26, 2010, when the Chase Certificate of Deposit containing the funds, then in the amount of $363,960.87, was not renewed. The funds were transferred into [the defendant's] personal savings account.

As to knowing misappropriation

In the present case, the disciplinary proceeding before the court involved the defendant's alleged violation of rule 1.15(f) of our Rules of Professional Conduct. The alleged violation was based on (1) the defendant's failure to continue to safeguard funds that were the subject of the parties' long-standing fee dispute in an escrow account and (2) the commingling of those funds with the defendant's personal funds. The court found by clear and convincing evidence that the defendant had failed to keep the disputed fees in escrow and that he impermissibly allowed those funds to be transferred into his personal bank account. As Disciplinary Counsel aptly notes in her brief, scienter is generally not required to establish a violation of our rules of professional responsibility; see Daniels v. Statewide Grievance Committee, 72 Conn.App. 203, 211, 804 A.2d 1027 (2002); and the court did not require Disciplinary Counsel to prove as much in concluding that the defendant had violated rule 1.15(f).

In so ruling, however, the court, in essence, emphasized that the defendant lacked the knowledge that the funds belonged to Yuille. The court explained that the parties' fee dispute had a tortuous and very confusing procedural history, and that the defendant had acted in this case on the basis of an unreasonable belief that he no longer was required to maintain the disputed funds in the escrow account. Put in other terms, the court found that the defendant acted with carelessness rather than with the awareness necessary to find that the defendant violated Practice Book § 2–47A. Having made these findings, the court expressly found that the defendant's conduct “[d]id not give rise to a knowing misappropriation of funds pursuant to Practice Book § 2–47A.”

...In short, Disciplinary Counsel has failed to convince us that the court applied an incorrect legal standard in determining that the defendant's actions in the present case did not amount to a knowing misappropriation. Accordingly, her claim fails.

As did Disciplinary Counsel's other contentions

Finally, Disciplinary Counsel claims that a reprimand was an insufficient sanction given that the defendant unilaterally and unreasonably determined that the fee dispute had been resolved and allegedly misappropriated $363,760.86 of his client's funds. Accepting, as we must, the facts found by the court, we are not convinced that the court abused its discretion by only reprimanding the defendant.

Closing whitewash

In the present case, the court heard three days of testimony and arguments regarding the defendant's actions as they pertained to his safeguarding of the funds in dispute. This included testimony from the defendant. The court found that although the defendant failed to exercise properly his fiduciary and professional responsibilities to keep the disputed funds safe and separate from his personal account, he did not engage in a knowing misappropriation of the funds; rather, his conduct was negligent, based on a unreasonable belief that he no longer was required to keep the disputed funds in escrow. As we have already indicated in part II A of this opinion, the court's finding that the defendant's actions were negligent is supported by the record as a whole and, when viewed with the requisite presumption of correctness, rationally supports the court's exercise of its discretion to impose a more lenient sanction. Accordingly, we cannot conclude that the court's imposition of reprimand rather than the suspension or disbarment sought by Disciplinary Counsel was a clear abuse of discretion.

Our review of the record leaves us with no doubt that the actions of the defendant were, at best, unreasonable. We also fully agree with the statements of the court in In re Wilson that misappropriation of a client's funds cuts to the very heart of the trust that the public places in attorneys every day and in our legal system generally.  It is a fundamental duty of attorneys to safeguard and protect with the utmost diligence any property held by the attorney on behalf of his or her clients. “[T]he fiduciary relationship between an attorney and a client requires absolute perfect candor, openness and honesty, and the absence of any concealment or deception.” (Internal quotation marks omitted.) Disciplinary Counsel v. Smigelski, 124 Conn.App. 81, 89–90, 4 A .3d 336 (2010), cert. denied, 300 Conn. 906, 12 A.3d 1004, cert. denied, U.S., 132 S.Ct. 101, 181 L.Ed.2d 28 (2011). Nevertheless, the mere fact that a more severe sanction might have been justified given the nature of the violation does not mean that the court here manifestly abused its discretion in imposing a lesser sanction or that the discipline imposed amounted to an injustice that must be remedied by a reversal.

"At best, unreasonable" is, at best, a timid approach to enforcing a sacred fiduciary obligation. 

The Connecticut Supreme Court affirmed the above-recited conclusions of the Appellate Court. (Mike Frisch)

April 7, 2019 in Bar Discipline & Process, Billable Hours | Permalink | Comments (0)

Friday, March 29, 2019

State Must Pay In Clutter Files Litigation

The Kansas Court of Appeals affirmed a district court decision awarding attorneys fees against the State in litigation related to the files of the In Cold Blood murders

On September 27, 2012, the State filed an ex parte verified petition asking the district court, among other things, to temporarily restrain and then preliminary and permanently enjoin Defendants from the sale, publication, replication, and distribution of any and all Kansas Bureau of Investigation file materials relating to the 1959 murder of members of the Clutter family in Holcomb, Kansas. That same day, the district court entered the ex parte temporary restraining order as requested. An amended ex parte temporary restraining order was filed on October 9, 2012.

On December 17, 2012, the district court held an evidentiary hearing on the State's request to convert the ex parte temporary restraining order into a preliminary injunction. At the end of the hearing, the court granted the parties' joint request to submit legal arguments in support of their respective positions. On April 23, 2013, the district court granted the State's request and entered a preliminary injunction but left open the possibility for Defendants to request the court vacate it at a later date. Citing K.S.A. 60- 905(b) as authority, the district court noted the State would not be required to post a bond in conjunction with the preliminary injunction.

On August 22, 2013, Defendants filed a motion to vacate the preliminary injunction. After significant delay due to discovery disputes, the State filed a motion for summary judgment on January 29, 2014. Defendants supplemented their motion to vacate on March 14, 2014, March 21, 2014, and June 6, 2014. The district court heard oral argument from the parties with regard to all pending motions on June 26, 2014, and took the matters under advisement. On November 7, 2014, Defendants filed an urgent request
for a ruling on their motion to vacate. On November 26, 2014, the district court granted Defendants' motion to vacate the preliminary injunction, concluding that it should not have been granted in the first place.

On May 27, 2015, Defendants filed a motion to compel discovery that the State previously had failed to produce. Following a hearing, the district court granted that motion and ordered the State to produce the requested documents no later than July 7, 2015. Rather than produce the documents as ordered, the State filed a motion to voluntarily dismiss the case. Defendants indicated they did not object to voluntary dismissal but noted that allowing the State to do so before Defendants had an opportunity to present the court with various motions related to the litigation (including but not limited to their forthcoming motion for costs and attorney fees pursuant to K.S.A. 60- 905[b]) would be highly prejudicial. Defendants subsequently filed a motion for costs and attorney fees. After further briefing and a hearing, the district court granted Defendants' motion for fees, awarding them $152,585 in attorney fees, but denied awarding costs. The district court held that the amount of fees it awarded all stemmed from the wrongfully issued preliminary injunction that was requested by the State. The district court also granted the State's motion to dismiss.

The court rejected the State's claim that sovereign immunity barred an adverse fee award

No Kansas court has ever held that the State may waive its immunity from suit in state court through its litigation conduct. But sovereign immunity finds its source in the common law, and the common law adapts to changing circumstances to advance notions of fair play and equity.

...we hold the defense of sovereign immunity is not available to the State to shield it from liability for damages, including attorney fees, incurred by Defendants in seeking dissolution of the temporary injunction affirmatively sought and granted in its favor but later vacated based on a finding that it was wrongfully issued. The fact that the State was statutorily exempted from posting a bond to secure the availability of monetary funds in the event an award of damages and attorney fees was granted is immaterial to our holding.

On the fee award merits below

In this case the district court awarded Defendants $152,585 in attorney fees, $137,937.50 of which went to the Hendricks & Lewis, PLLC law firm and $14,647.50 of which went to the Cornwell & Vokins law firm. The district court based that award on a careful review of Defendants' attorney billing logs and the KRPC 1.5(a) factors. Specifically, the district court found that (1) the case was novel and difficult and therefore required significant time and skill to perform the necessary services appropriately; (2) the work in this case precluded the attorneys involved from working on other cases due to the time sensitivity of the action; (3) the hourly rates charged by both firms were within the range of those customarily charged for similar services in Topeka, Kansas; (4) the work required to obtain the result was exceptional particularly in light of the constitutional issues involved; (5) Hendricks & Lewis had a prior relationship with one of the defendants and because it was an out-of-state firm, it was necessary to involve Cornwell & Vokins as local counsel; (6) all of the attorneys involved in the case were highly qualified and experienced; and (7) the fees assessed were based on hourly rates that were reasonable given the nature and uniqueness of the case. Based on a review of the record, we conclude that the district court's findings are supported by substantial competent evidence and that a reasonable person would agree with its award of attorney fees totaling $152,585.

But on appeal attorneys fees

Based on the eight factors set forth in KRPC 1.5(a), we find the $58,490 in attorney fees requested for work on this appeal to be excessive. In support of our finding, we note the issue in this appeal already had been extensively litigated through written motions and oral argument at the district court level. We also note the lack of sufficient information to evaluate the reasonableness of Mr. Lewis' reduced fee request. In addition, we find the fees requested for time spent to travel to oral argument is excessive. Finally, we find unreasonable the fees request for time spent to prepare the three motions for an extension of time to file Defendants' appellate brief. In the absence of evidence to the contrary, such motions are for the convenience of counsel and their schedule. Because some of the entries in the affidavit submitted by Mr. Vokins include time spent on motions for extension of time as well as an additional task, we have calculated the total of those entries and credited half that amount to time spent on motions for extension of time and the other half to time spent on other tasks. For all of these reasons, we award to Defendants the sum of $15,450 in appellate attorney fees and the sum of $264.02 in expenses associated with this appeal. The award totals $15,714.02.

(Mike Frisch)

March 29, 2019 in Billable Hours | Permalink | Comments (0)

Wednesday, March 13, 2019

Sum Uncertain Dooms Confessed Judgment For Legal Fees

The New York Appellate Division for the Third Judicial Department vacated a confessed judgment for legal fees

In early February 2013, the defendant executed a blank affidavit of confession of judgment in favor of the plaintiff for “unpaid attorney’s fees and expenses due on cases plaintiff referred to the defendant for continued prosecution as co-counsel to plaintiff’s law firm and in accordance with the terms of the letter agreement entered into between plaintiff and defendant dated January 24, 2013.” It is undisputed that at the time the affidavit was executed, neither the plaintiff nor the defendant knew the exact amount owed by the defendant to the plaintiff under the January 24, 2013, letter agreement.

Approximately one year later, still unable to secure the defendant’s cooperation in calculating the exact amount owed, the plaintiff unilaterally estimated the amount to be $207,474.92 filled in the previously executed affidavit of confession of judgment accordingly, and used that affidavit, as so modified, as the basis for obtaining a judgment by confession against the defendant in that amount, which was filed in the Nassau County Clerk’s Office on April 8, 2014.

In September 2016, nonparty Elena M. Perez, a junior judgment creditor of the defendant, moved to vacate the judgment by confession on the ground that the affidavit of confession of judgment failed to comply with the strict requirements of CPLR 3218. In an affidavit filed in support of the motion, the defendant averred that the affidavit of confession of judgment was executed in blank, and the sum confessed was inserted at a later time without his knowledge or consent. The plaintiff opposed the motion. The Supreme Court denied the motion, and Perez appeals.

The law

Here, it is undisputed that the affidavit of confession of judgment, at the time it was executed by the defendant, failed to state the sum for which judgment could be entered. It is also undisputed that the sum was unilaterally filled in months later by the plaintiff, based on calculations that are neither fully explained nor ascertainable from the evidence contained in the record. Under the circumstances, the affidavit did not meet the requirements of CPLR 3218(a)

(Mike Frisch)

March 13, 2019 in Billable Hours | Permalink | Comments (0)

Fee (Sharing) Dispute

The New York Appellate Division for the First Judicial Department dismissed an appeal

Under the Rules of Professional Conduct (22 NYCRR 1200.0) rule 1.5(g)(1), a lawyer may not divide a fee for legal services with another lawyer who is not associated with the same firm unless, inter alia, the division is in proportion to the services performed by each, and by writing given to the client, each lawyer assumes joint responsibility for the representation (Samuel v Druckman & Sinel, LLP, 12 NY3d 205, 210 [2009]). Here, the record does not permit resolution of the claim for breach of contract regarding fee-sharing as a matter of law, given plaintiff's partner's affidavit regarding his firm's participation in the contested Workers' Compensation cases, through staff translations, arranging appointments, and performing various other tasks associated with those cases.

We grant plaintiff's motion to compel defendants to provide access to the Workers' Compensation Board's eCase system with respect to the cases referred to defendants by plaintiff because the information sought is material and necessary.

(Mike Frisch)

March 13, 2019 in Billable Hours | Permalink | Comments (0)

Monday, February 18, 2019

Filed Too Late

The Massachusetts Supreme Judicial Court has affirmed the dismissal of a suit for legal fees on statute of limitations grounds. 

An attorney had left the plaintiff law firm and taken the case with him

Grace, then an employee of HLO, performed most, if not all, of the legal work on the case, but neither he nor HLO recorded Grace's hours contemporaneously.

HLO terminated Grace on June 25, 2010, while Hicks's medical malpractice case was pending. Hicks, notified of Grace's departure, elected to have Grace continue to represent
him in the medical malpractice action. Grace and HLO were notified of Hicks's election in writing on July 1, 2010. On July 2, HLO transferred Hicks's file to Grace at his new firm, Denner Pellegrino, LLP (Pellegrino), and shortly thereafter Hicks entered into a second contingent fee agreement regarding his medical malpractice action with Pellegrino.

The retainer agreement with HLO allowed an hourly fee if discharged.

The pertinent discharge provision unmistakably provides that if the client discharges HLO, then the client will be liable to HLO for work performed by HLO at a prescribed rate. Therefore, whether we apply the usual rule restated in Jenney, 402 Mass. at 154, or confine our analysis to the plain language of HLO's fee agreement makes no meaningful difference -- HLO's cause of action against Hicks for legal services accrued no later than July 1, 2010, the date that HLO was notified that Hicks had elected to terminate HLO's services.

HLO's argument to extend the statute because Grace had not provided his hours failed. 

Grace's refusal to cooperate with HLO has no bearing on when HLO's cause of action for legal fees against [client] Hicks accrued.

...If HLO had conditioned its entitlement to fees on Hicks's recovery in the underlying medical malpractice suit, then Halstrom's argument that the statute of limitations began to run when Hicks received his settlement check might be persuasive; but HLO did not do that. It is to the terms of that provision that HLO is now bound.

In short, in accordance G. L. c. 260, § 2, Halstrom had until July 1, 2016, to bring his contract action against Hicks. That Halstrom missed the deadline "by a few days" is inconsequential -- his claim is time barred nevertheless.

Equitable claims also failed. (Mike Frisch)

February 18, 2019 in Billable Hours | Permalink | Comments (0)

Monday, February 4, 2019

An Ordinary Arrangement

A newly-released opinion of the District of Columbia Bar Legal Ethics Committee

Ethics Opinion 376

Mandatory Arbitration Provisions in Fee Agreements

Fee agreements containing mandatory arbitration provisions are "ordinary fee arrangements," and the requirements of Rule 1.8 which addresses business transactions between lawyers and clients do not apply. The standard for obtaining client consent to fee agreements containing mandatory arbitration provisions is set forth in Comment [13] to Rule 1.8, and Legal Ethics Opinions 211 and 218 are superseded by Comment [13] and this opinion.  
 
If it is explained
 
For a client to appreciate the "scope and effect" of a mandatory arbitration provision, the lawyer must provide a client with sufficient information about the differences between litigation in the courts and arbitration proceedings. As a general matter, a discussion regarding at least the following differences between the two methods of dispute resolution is prudent: (1) the fees incurred;(2) the available discovery;(3) the right to a jury; and (4) the right to an appeal. As with the application of the informed consent standard, the scope of this discussion depends on the level of sophistication of the client.
 
(Mike Frisch)

February 4, 2019 in Billable Hours, Clients | Permalink | Comments (0)

Saturday, January 26, 2019

ALL CAPS

The South Carolina Court of Appeals has enforced a fee arbitration provision of a retainer agreement

This is an appeal from a circuit court order compelling Lisa Moore (Client) to resolve a fee dispute through the Resolution of Fee Disputes Board of the South Carolina Bar (the Board). Client argues (1) Jean Derrick (Attorney) waived the right to compel her appearance before the Board by first filing an action in the circuit court, (2) the circuit court lacked authority to compel Client's appearance before the Board, and (3) Attorney's fee agreement is unenforceable under the South Carolina Uniform Arbitration Act. We affirm.

The client retained the attorney in a family law matter. The agreement

Client retained Attorney in April 2011 to represent her in a family court matter in Kershaw County. At the onset of the representation, Client and Attorney signed a fee agreement, which provided: "ANY DISPUTE CONCERNING THE FEE DUE PURSUANT TO THIS AGREEMENT SHALL BE SUBMITTED BY THE DISSATISFIED PARTY FOR A FULL, FINAL RESOLUTION TO [THE BOARD], PURSUANT TO RULE 416 OF THE SOUTH CAROLINA APPELLATE COURT RULES."

The dispute

Client's last payment to Attorney was in May 2014; however, there still remained an outstanding balance of $10,484.40. Client did not object to the amount of the bill and repeatedly assured Attorney she would pay, although this evidently never happened. On October 6, 2014, Attorney commenced an action against Client in the circuit court to recover the unpaid fees. 

Client answered, and by way of an affirmative defense, asserted Attorney had failed to comply with the provision of the fee agreement that required all fee disputes to be resolved by the Board. Client also submitted counterclaims for breach of contract accompanied by a fraudulent act, violation of the South Carolina Unfair Trade Practices Act, abuse of process, and conversion. Attorney answered and moved for an order compelling Client to submit the fee dispute to the Board pursuant to the fee agreement and Rule 416, SCACR.

The court

We find Client consented to the jurisdiction of the Board as required under Rule 9 of Rule 416, SCACR, by signing the fee agreement. The rule does not draw a distinction between a client who consents to jurisdiction prior to the representation and one who gives consent after a fee dispute arises...By signing the contract and agreeing to be bound by the terms of the fee agreement, the parties conferred exclusive jurisdiction to the Board over fee disputes. See Bailey v. Bailey, 312 S.C. 454, 459, 441 S.E.2d 325, 327 (1997) (noting exclusive jurisdiction over a fee dispute vests in the Board upon a client's consent to be bound). Accordingly, we find the circuit court was within its authority to enforce the contractual provision and send the fee dispute to the Board.

Thus

we find no error in the circuit court order compelling Client and Attorney to resolve their fee dispute before the Board. We further find the Uniform Arbitration Act is inapplicable to fee agreements entered into between an attorney and client.

January 26, 2019 in Billable Hours | Permalink | Comments (0)

Monday, January 14, 2019

Anti Trust

The United States Court of Appeals for the Fourth Circuit affirmed the district court in a law firm dispute

The dispute here is between two firms that represented plaintiffs in a large antitrust class action. The appellant, Criden & Love, seeks from the Saveri Law Firm a larger share of the award of attorneys’ fees in the action, asserting contentions sounding in contract, tort, and unjust enrichment. The district court rejected all of appellant’s claims. For the reasons that follow, we affirm.

The relationship between the two firms in this case is a product of the antitrust laws. The Supreme Court held decades ago that the only consumers who can challenge anticompetitive conduct are those who purchase goods or services directly from the supplier. See Ill. Brick Co. v. Illinois, 431 U.S. 720 (1977). Since many buyers may be unwilling to rock the boat with their business partners, the universe of potential antitrust plaintiffs is therefore relatively small. Firms like Criden & Love, the appellant here, step into the void, finding plaintiffs willing to sue and pairing them up with large antitrust specialists who can pursue their claim. They work for a fee, which can be substantial. In the case of Criden & Love, the typical referral fee is 12.5% of the larger firm’s total fee.

In February of 2010, Criden & Love identified a plaintiff who was willing to challenge anticompetitive conduct in the titanium dioxide market. It referred this client, Isaac Industries, to two law firms, Berger Montague and Lieff Cabraser, at the usual 12.5% rate. Isaac Industries then brought its antitrust claim, alleging price-fixing for titanium dioxide. This case was consolidated with a similar case brought by Haley Paint.

In April of 2011, Lieff Cabraser became co-lead counsel over the consolidated action, known as the “TiO2 Litigation.” A third firm, East Coast Colorants d/b/a/ Breen Color Concentrates (“Breen”), joined the case as a plaintiff a few months later. Breen had no connection with Criden & Love.

The trouble began in May of 2012, when an antitrust partner at Lieff Cabraser, Joseph Saveri, left to start his own enterprise, the Joseph Saveri Law Firm. Prior to starting his own firm, while still working at Lieff Cabraser, Saveri had filed a notice to appear on behalf of Isaac Industries. Saveri’s new firm soon took on Breen, Isaac Industries’ co plaintiff, as a client in the TiO2 litigation, entering an appearance on its behalf on June 1, 2012. Saveri’s firm never had an agreement with Isaac Industries, which was still represented by Lieff Cabraser.

Saveri thereafter sought the lucrative lead counsel role, which he obtained in August of 2012. No firms in the case objected to his motion to become lead. Ultimately, the class action was settled for a considerable sum of money. The attorneys’ fees in the case totaled more than $54 million. As co-lead counsel, the Saveri Law Firm was awarded approximately $10 million, based entirely on work performed after Saveri left Lieff Cabraser. The other firms representing the plaintiffs, including Lieff Cabraser, Berger Montague, and Criden & Love, were also compensated for their work on the case. In addition, Criden & Love was paid referral fees from Lieff Cabraser and Berger Montague, pursuant to the referral agreements for Isaac Industries. All told, Criden & Love was awarded $ 2.8 million for its role in the case, including more than $900,000 for its referral agreements.

The dispute in this case centers around what happened after Saveri left Lieff Cabraser to start his own firm. Saveri called Kevin Love, a Criden & Love partner, to notify him of his impending departure. On the call, Mr. Love alleges that he told Saveri he would still expect payment of the referral fee that Criden & Love entered into with Lieff Cabraser. Both parties acknowledge that at no point during the call did Saveri accept the request for a referral fee. After Saveri’s firm was added as co-lead counsel, Criden & Love sent two emails to Saveri attempting to confirm the referral agreement, but Saveri did not respond to either message. Once the case settled and the fees were distributed, Saveri communicated to Criden & Love that they had no agreement and no referral fee would be paid.

Saveri sued in Maryland federal court

the court held for Saveri on all counts. Joseph Saveri Law Firm, Inc. v. Michael E. Criden, PA, 2017 WL 3917003 (D. Md. Sept. 7, 2017). On Criden & Love’s contract theories, the court noted inter alia that the parties had never formed an express or implied contract. On the equitable claims, the court held that the “equity does not favor Criden & Love.” Id. Saveri was only compensated for work after leaving Lieff Cabraser, while Criden & Love was paid both for its own work on the case and for its referral of Isaac Industries. Finally, the court rejected Criden & Love’s fraud claim, finding the argument that Saveri’s failure to strike an appearance on behalf of Isaac Industries constituted fraud to be “unavailing.” Id. This appeal followed.

And led to affirmance

Both parties here are sophisticated actors and repeat players in the market for antitrust litigation. Both could have done more to clarify the terms of the relationship between them, and both failed to do so. It is not the job of the court to do this for them. In the absence of any sign that Saveri accepted the terms offered by Criden & Love, we must leave the negotiation where we found it. As such, we see nothing more than an offer that was never accepted. Since there are no disputed facts that would lead to a different conclusion, the district court was correct to resolve this question as a matter of law.

The curt also rejected equitable claims and quantum meruit as a basis to overturn the trial court. (Mike Frisch)

January 14, 2019 in Billable Hours, Economics | Permalink | Comments (0)

Monday, December 31, 2018

"Directly Related" Fees And Costs Recovery Allowed In Florida

The Florida Supreme Court answered a question of the interpretation of its pre-2014 version of Rule 3.4(b)

This case involves a dispute over the recoverable amount of prevailing party fees and costs. The issue presented is whether the pre-2014 version of Rule Regulating the Florida Bar 4-3.4(b), which addresses witness payments and the prohibition against offering inducements to witnesses, prevents the prevailing party in this case from taxing as costs certain payments made to fact witnesses for their “assistance with case and discovery preparation.” This Court has for review Trial Practices, Inc. v. Hahn Loeser & Parks, LLP, 228 So. 3d 1184, 1191 (Fla. 2d DCA 2017), in which the Second District Court of Appeal concluded that the witness payments were permitted under rule 4-3.4(b) and were thus recoverable. The Second District then certified the following as a question of great public importance...

Based on our analysis of the issue presented by this case and consistent with the text of the rule, we rephrase the certified question as follows:

 Does the pre-2014 version of rule 4-3.4(b) of the Rules Regulating the Florida Bar permit a party to pay a fact witness for the witness’s assistance with case and discovery preparation that is not directly related to the witness preparing for, attending, or testifying at proceedings?

We answer the rephrased question in the negative and remand for further proceedings consistent with this opinion.

The case

The relevant events began in August 2005 when Petitioner, Trial Practices, Inc. (“TPI”), entered into an agreement with Jack J. Antaramian to provide litigation consulting services to Antaramian concerning a multi-million-dollar dispute with his business partner, David E. Nassif, about commercial real estate holdings (the “Nassif suit”). The consulting agreement provided that TPI would receive 5% of Antaramian’s “gross recovery” in the Nassif suit. After the Nassif suit ended in a mistrial, Antaramian and Nassif resolved their dispute by entering into a complex settlement agreement involving various entities. The principal architects and drafters of the settlement agreement were Antaramian’s longtime tax and business attorneys with the Boston-based firm Burns & Levinson LLP.

In the wake of the settlement agreement, TPI claimed the 5% fee based on the value of certain transferred property and the settlement of related litigation involving Antaramian and Nassif. Antaramian denied owing TPI the 5% fee, asserting that the settlement agreement with Nassif was a “walk away” agreement with no “gross recovery” to either side. In June 2006, TPI sued Antaramian for breach of the consulting agreement. Extensive discovery ensued regarding Antaramian’s finances and his dealings with Nassif.

At trial in 2011, TPI presented several expert witnesses who testified that the settlement agreement in the Nassif suit resulted in a gross recovery to Antaramian of up to $100 million based on certain economic benefits including cancellation of indebtedness. Antaramian presented his own expert witness as well as ten fact witnesses, seven of whom testified in some manner to the issue of “gross recovery.” Those seven witnesses—all licensed professionals involved in the Nassif suit and the resulting settlement agreement—included: (1) two of Antaramian’s attorneys in the Nassif suit;  (2) one of Nassif’s attorneys in the Nassif suit; (3) three lawyers from Burns & Levinson LLP; and (4) Antaramian’s longtime accountant who prepared Antaramian’s federal income tax returns. The gist of their testimony was that the settlement agreement was designed to provide no recovery to either Antaramian or Nassif, and that there was no tax fraud or cancellation of debt income.

Antaramian won at trial and sought costs and fees.

We are asked to determine whether rule 4-3.4(b) of the Rules Regulating the Florida Bar permits a party to make certain payments to fact witnesses. This issue presents a pure question of law that is subject to de novo review...

We think the more appropriate inquiry is whether the witness’s “assistance with case and discovery preparation” is directly related to the witness “preparing  for, attending, or testifying at proceedings.” Although less than perfectly precise, viewing the payments through that narrower lens is consistent with the language of the rule and avoids prejudicing parties in highly complex cases such as this where they are dependent upon professionals. Indeed, not only was Antaramian required to defend himself, including against accusations of tax fraud, but it appears the professionals upon whom he was dependent also had to defend themselves against accusations of wrongdoing. One of Antaramian’s former trial attorneys testified at the fee hearing regarding the “very adversarial” nature of the litigation, the “[t]ons  of documents,” and TPI’s “theory of the case . . . that everybody on Mr. Antaramian’s side of the transaction was a crook, was actually a thief and a liar.” That testimony was consistent with that of others, including Antaramian’s longtime accountant as well as the Burns & Levinson attorney who was the principal architect of the settlement agreement. That Burns & Levinson attorney also testified regarding “a host of complicating factors” in the case.

It would be unfair and prejudicial to conclude that, beginning the moment TPI filed suit, Antaramian’s longtime professionals who had the necessary knowledge for him to begin to defend the suit, who were involved in the transaction that was the very subject of the suit, and whose own actions and character were seemingly in question, could not be reasonably compensated for any “assistance” regarding complex matters about which they would later be called to testify. We conclude that the rule does not require such a result. But we reiterate that a fact witness’s “assistance” must be directly related to the witness “preparing for, attending, or testifying at proceedings.”

The court has a spiffy new website design. (Mike Frisch)

December 31, 2018 in Billable Hours | Permalink | Comments (0)

Monday, December 17, 2018

Howrey Dissolution Certified Questions To Be Argued Today

An oral argument before the District of Columbia Court of Appeals this morning

Monday, December 17, 2018 10:00 AM

SPECIAL SITTING - REGULAR

No. 18-SP-0218 ALLAN B. DIAMOND, CHAPTER TRUSTEE OF HOWREY,
LLP V. HOGAN LOVELLS US, LLP, ET AL *public interest

Christopher R. Murray, Esquire
Christopher Sullivan, Esquire
Shay Dvoretzky, Esquire
Michael Ryan Pinkston, Esquire
Robert Radasevich, Esquire
Jack Mckay, Esquire
Robert Novick, Esquire
Gregory G. Garre, Esquire
Brian R. Matsui, Esquire
Logan G. Haine-Roberts, Esquire

In a February 2018 opinion, the United States Court of Appeals for the Ninth Circuit had sought guidance on governing District of Columbia law

Pursuant to D.C. Code § 11-723 we respectfully ask the District of Columbia Court of Appeals to resolve three questions of District of Columbia law that “may be
determinative” of this bankruptcy appeal. D.C. Code § 11- 723(a):

(1) Under District of Columbia law does a dissociated partner owe a duty to his or her former law firm to account for profits earned post-departure on legal matters that were in progress but not completed at the time of the partner’s departure, where the partner’s former law firm had been hired to handle those matters on an hourly basis and where those matters were completed at another firm that hired the partner?

(2) If the answer to question (1) is “yes,” then does District of Columbia law allow a partner’s former law firm to recover those profits from the partner’s new law firm under an unjust enrichment theory?

(3) Under District of Columbia law what interest, if any, does a dissolved law firm have in profits earned on legal matters that were in progress but not completed at the time the law firm was dissolved, where the dissolved law firm had been retained to handle the matters on an hourly basis, and where those matters were completed at different pre-existing firms that hired partners of the dissolved firm post-dissolution?

Our phrasing of the questions should not restrict the Court’s consideration of the issues. The Court may rephrase a question as it sees fit in order to best address the contentions of the parties or the specifics of D.C. law.

The argument can be heard in real time on the court's web page. (Mike Frisch)

December 17, 2018 in Billable Hours, Current Affairs, Economics | Permalink | Comments (1)

Friday, December 7, 2018

Sitting Shiva: Mourning Has Broken

A case that began with an altercation at a shiva has been remanded by the United States Court of Appeals for the District of Columbia to resolve the obligations of an insurer to pay legal fees

Appellant Kenneth Feld (“Feld”) retained the law firm of Fulbright & Jaworski, LLP (“Fulbright”) in 2008 to defend him in an action brought by his sister, Karen Feld (“Karen”). After a jury trial, Feld prevailed in that action. This case is a follow-up to the action between Feld and his sister. It involves a claim by Feld against appellee, Fireman’s Fund Insurance Company (“FFIC”), for reimbursement of expenses, largely attorney fees, that he incurred in the action brought by his sister. According to Feld, FFIC has refused to reimburse him for the full amount of reasonable defense costs associated with the successful representation provided by Fulbright. FFIC, in turn, acknowledges that it agreed to cover Feld’s defense costs and that it paid Fulbright over $2.1 million for its representation of Feld. However, FFIC contends that the additional $2.4 million in attorney’s fees and costs sought by Feld are based on rates substantially higher than the rates agreed to by the parties...

The record in this case indicates that the parties never reduced any purported rate agreement to writing. Instead, FFIC relies on genuinely disputed communications between the parties’ representatives to support its position. And the disputed communications to which FFIC points do not unambiguously show that the parties entered a rate agreement as asserted by FFIC. Summary judgment cannot be granted on these terms. We therefore reverse this portion of the District Court’s judgment and remand the case for trial. However, we affirm the District Court’s denial of Feld’s Motion to Compel certain communications between FFIC and its attorneys.

The litigation

Feld’s aunt passed away in September 2007. At the time of her death, the aunt resided in a condo owned by Feld in Washington, D.C. Feld hosted a Shiva – a Jewish mourning ritual – for his aunt in the condo. His sister, Karen, attended the Shiva, but she was eventually removed from the condo building by security guards who had been hired by Feld. In September 2008, Karen filed suit against Feld for injuries allegedly sustained during her removal from the building, raising claims of assault, battery, false imprisonment, intentional infliction of emotional distress, and negligent infliction of emotional distress.

The Washington Post reported on the  underlying dispute

When prayerful mourners gathered that first evening to sit shiva for 92-year-old Shirley Feld, an arts patron and prominent member of Washington's Jewish community, everything went fine. But something unseemly happened during the next night of mourning at the dowager's penthouse. It's led to yet another Feld family drama -- this time a multimillion-dollar lawsuit pitting sister against brother.

In a complaint filed in U.S. District Court, former gossip columnist Karen Feld alleges that her businessman brother, Kenneth Feld -- whose family-entertainment conglomerate includes the Ringling Bros. and Barnum & Bailey Circus -- authorized her forceful removal from their aunt Shirley's shiva service. Karen Feld claims that a trio of "large, aggressive" bodyguards working for Kenneth beat her and threw her into an elevator, along with her ever-present toy poodle, Campari.

Feld v. Feld is the latest chapter in a family saga already rife with bitter feuds and whispered secrets. Karen and Kenneth, the only children of the late circus impresario Irvin Feld -- and the niece and nephew of Shirley Feld -- have been estranged for decades. Their last major court skirmish was 25 years ago over Irvin Feld's will, which cut Karen out of the family business.

Kenneth Feld declined to comment, but his attorneys filed court papers earlier this month to dismiss elements of his sister's complaint, which she brought against him last September, a year after their aunt's death. Karen Feld also would not comment, although one of her lawyers, Steven Gremminger, said, "Karen will litigate her claims as long as it takes for her to get justice."

Her suit alleges that the beating aggravated a brain tumor that later had to be removed, and caused her emotional distress, "symptoms of Tourette Syndrome" and "seizure-like episodes." For those and other alleged injuries, Karen Feld wants $110 million in damages from her younger brother.

Determining what really happened on the evening of Sept. 26, 2007, at the Colonnade building on New Mexico Avenue NW is a matter of billable hours -- and there are likely to be plenty, given the litigious parties. But clearly something went awry: Attendees recall hearing Karen Feld screaming and cursing outside of Shirley Feld's spacious penthouse not long after a rabbi commenced the service in the dining room.

"She was there one minute, everything was cool, calm and collected . . . then boom, suddenly she's on the outside," said an attendee who, like others aware of the incident, declined to be identified in the newspaper because of the case's sensitivity. "Everyone was startled. It was shocking."

The suit says that the alleged beating caused Karen Feld to "utter obscenities" while pinned down in the hallway after being ejected. She also alleges that her brother came into the hallway, tossed her purse to one of the burly men and said: "This is hers. Get rid of her. Her name is F-I-E-L-D. She is not family. She doesn't belong here."

Shirley Feld's death initially occasioned an opportunity for reconciliation between her niece and nephew, observers say. Decades ago, Karen, now 61, and Kenneth, now 60, lived in the penthouse and were raised by their aunt Shirley and uncle Israel (Irvin Feld's brother). Their mother committed suicide in 1958, when Kenneth was 9 and his sister was 10, and their entrepreneur father, who first prospered locally as a rock-and-roll promoter, traveled frequently on business.

In his eulogy at the funeral, the suit says, Kenneth joined the officiating rabbi, M. Bruce Lustig of the Washington Hebrew Congregation, in describing Karen Feld as "the apple of Shirley's eye." (Lustig declined to discuss the case. "It's not newsworthy," he said. "I don't think I serve any of my congregants well by sharing any of this.")

Irvin Feld, a man given to flamboyant suits and grand PR gestures, bought the Ringling Bros. circus in 1967, staging a contract signing ceremony at the Colosseum in Rome. Kenny, as he is known to family and friends, went to work with his father and rose to the top. Karen also did a stint in the promotions end of the business but has said that her father groomed Kenny while discouraging her. "There was nowhere to go in the organization because my father just made sure there was nowhere for me to go," she told the now-defunct local magazine Regardie's in 1990.

Irvin's death in 1984 only heightened tensions between the siblings. "The bottom line was, I got nothing. I did not inherit one penny according to my brother's interpretation of the will," Karen told The Washington Post in a 1990 profile. Kenny was executor of the will; she sued him for $10 million, about half of the estate at that time. The Post reported that she settled out of court for less than $1 million in property, which included a house in Georgetown.

The Regardie's magazine article, which included several derogatory statements by Karen, later became crucial to one of the longest-running Superior Court cases in recent memory. The piece infuriated Kenny. It exhumed some Feld family skeletons, saying that Irvin Feld was a closeted homosexual and that Adele Feld killed herself at 31 because she could not change his sexual orientation.

Kenneth Feld would later call the allegation of homosexuality "an absolute lie," adding, "My mother's condition predated her marriage to my father."

But he didn't seek a retraction or sue the magazine; instead, he authorized an extensive spying operation against the article's author, Jan Pottker of Potomac.

The operation lasted seven years and cost Feld millions, according to court filings. It prompted Pottker to bring a $60 million lawsuit against Feld and others, including Clair George, the CIA's former head of worldwide covert operations, whom the circus had brought on as a consultant. The case lasted nine years. Feld finally settled with Pottker last fall on undisclosed terms.

Kenneth Feld is chairman and chief executive of the privately held, Vienna-based Feld Entertainment, which produces ice shows for Disney ("High School Musical," among them). In a 2003 Forbes magazine article, Kenneth Feld's fortune was estimated at $775 million.

Karen Feld, who once wrote columns for Roll Call, the Washington Times and the Examiner, now freelances and maintains a Web site. She has long been a fixture on the party circuit, carrying her five-pound poodle wherever she goes. (Campari even has his own business cards.)

She also receives proceeds from a trust established by Israel Feld for the benefit of Shirley Feld and their niece and nephew. Kenneth and Karen are now its sole beneficiaries.

In a separate case, filed last month in Superior Court here after being dismissed in Virginia, Karen is suing to remove her brother from trusteeship. She also wants an accounting of the trust's worth, which her court papers estimate at $5 million, and an amount equal to the trust's value for Kenneth's alleged "breach of his fiduciary duties."

In her complaint that alleges the beating, Karen says she had not spoken with her brother "for many years" or visited with her aunt, who still lived in the Colonnade building where Karen was reared. But as Shirley neared death, Kenny phoned his sister to tell her about funeral and shiva arrangements, the suit says. The first shiva proceeded "without incident," it says, and Karen "spoke affably with the three adult children of [Kenneth's], two of whom she had not seen since 1984, when they were babies."

Karen says that on the second night, her brother and his children hugged her, but her feelings of grief brought on "signs of an impending seizure-like episode." Karen headed to a nearby bathroom with Campari, whom she describes as a "service animal" able to sense when a seizure is imminent. (When previously barred from public spaces with the dog, she has produced papers saying the pooch qualifies as a service animal.)

One of the large men grabbed her when she approached the bathroom, she says. (The suit doesn't say why.) Karen Feld, whom the suit describes as 5-foot-3 and 108 pounds, alleges that the man threw her and the dog out a service entrance and that two other guards dragged her out of the building.

In the Colonnade's driveway, Karen says she dialed 911 to report her injuries, but no police or ambulance came. So she drove herself the mile to Sibley Hospital's ER for treatment. She claims that as a result of the beating, a benign brain tumor had "shifted," aggravating her symptoms, and in January 2008 she had surgery to remove the golf-ball-size tumor.

Some who knew Shirley Feld, a longtime, generous supporter of the Washington Ballet, say the incident tarnished her memory. "What a sad thing, what a shame, to have it end up like this," says one person with knowledge of the shiva incident. "Maybe it would have brought the brother and sister together, but instead it broadened the gap between them."

It wasn't the kind of legacy Irvin Feld wanted for the family name. "I would like to be remembered for having made a contribution to the continuance of the circus," he once said. "It's practically all we have left of good, wholesome, clean entertainment that the whole family can enjoy."

(Mike Frisch)

December 7, 2018 in Billable Hours | Permalink | Comments (0)

Thursday, December 6, 2018

Litigation Advance Not Usurious Loan

The New York Appellate Division for the First Judicial Department rejected an effort to avoid repayment of an advance against litigation proceeds

Pursuant to an "Agreement for Purchase of Claim," plaintiff, as purchaser of an interest in defendant's pending personal injury litigation, agreed to "advance" to defendant, as seller, $76,930 at a "Compounded Monthly Carrying Charge" of 3.2% and an "Annual Percentage Rate" of 45.93%, in exchange for defendant's agreement that repayment would be made from the proceeds of the personal injury action. The agreement provided that repayment was contingent on defendant's "successful recovery of proceeds" from the action. Pursuant to the agreement, $60,000 of the advance was used to purchase and pay off an advance previously made to defendant by an entity called Fast Trak Legal.

After receiving settlement proceeds, defendant refused to pay plaintiff the amount called for in the agreement. He argues that, given the excessive interest rate, the agreement is usurious and unconscionable. We conclude that the agreement is neither usurious nor unconscionable.

This was not a "loan" to which usury laws applies

Assignment agreements such as the agreement at issue here are not loans, because the repayment of principal is entirely contingent on the success of the underlying lawsuit.

Bottom line

Contrary to defendant's argument, there are no issues of fact as to the amount that plaintiff overpaid to Fast Trak. Based on the clear terms of the Fast Trak agreement, the court correctly found that the overpayment was only $100, not $5,600, as defendant claimed, and adjusted the amount awarded to plaintiff accordingly. This insubstantial discrepancy does not render the agreement void based on mutual mistake.

(Mike Frisch)

December 6, 2018 in Billable Hours | Permalink | Comments (0)