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In the first state supreme court case to address the valuation of in-house counsel’s time, California’s highest court is considering whether an insurance company’s in-house litigation team can recover attorney fees after prevailing in a contract dispute, and how any such fees should be calculated.

State and federal courts have approved fee awards for corporate counsel in certain cases at least since the 1960s. A standard for determining such fees, however- whether they should be derived from costs incurred, for example, or based on fair market value- remains elusive. In the case before the California Supreme Court, PLCM Group Inc. v. Drexler, No. S080201, Los Angeles attorney David Drexler, 48, contends that he should not have to pay $61,050 in attorney fees because Professional Liability Claims Managers (PLCM) used the legal services department of its parent, Aon Corp. PLCM sued Mr. Drexler for $10,319.62 he had refused to pay on a $20,000 deductible for defense of a malpractice suit, then defended itself against Mr. Drexler’s cross-complaint alleging bad faith, breach of contract and infliction of emotional distress. The cross-complaint was dismissed on summary judgment. A California 2d District Court of Appeal panel affirmed the fee award in May 1999. The California Supreme Court heard arguments in the case on Feb. 10.

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