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Two recent rulings from the U.S. Court of Appeals for the Third Circuit have made it clear that plaintiffs attorneys who don’t earnestly assess their fee petitions before submitting them can get slapped down by the courts—hard.

In one decision, Clemens v. New York Central Mutual Fire Insurance, the appellate court ruled for the first time that it is fair game for a district court to award an otherwise successful attorney nothing if their fee petition is “outrageous.” Less than two weeks after that ruling came down, the court further ruled in Young v. Smith that an attorney can be sanctioned and referred to the disciplinary board based on their fee petition.

Although the circumstances that gave rise to the Third Circuit’s recent rulings are, according to attorneys who spoke with The Legal, particularly “egregious,” lawyers are taking them as a clear reminder that fee petitions are not the opening salvo in a negotiation process, and lawyers need to take a close look to make sure their requests are reasonable before submitting them.

“This case points out the importance of counsel maintaining accurate records with respect to their fees in order to present a fair and reasonable petition to the court,” Haggerty, Goldberg, Schleifer & Kupersmith attorney James Haggerty said, speaking about Clemens, which he handled on appeal.

Chair of Post & Schell’s insurance law practice, Richard McMonigle, who wrote a book on bad-faith law for ALM, agreed.

“If a successful plaintiff overreaches in their fee petition, the courts are going to look very, very carefully at it, and then they run the risk of getting absolutely nothing,” McMonigle said.

Long Time Coming

In resolving the first-impression issue in Clemens, the Third Circuit answered a question that, according to some attorneys, has dogged the court for years.

Rieders, Travis, Humphrey, Waters & Dohrmann attorney Clifford Rieders, who has written extensively on the topic, said that, ever since the U.S. Supreme Court determined in 1975 in Alyeska Pipeline v. Wilderness Society that there cannot be fee-shifting without specific statutory authority, courts have been struggling with whether attorney fees need to be awarded in all cases where a plaintiff is the winning party.

In the wake of that ruling, he said, a wave of new laws were passed allowing fee-shifting in various cases. The first laws allowing fee-shifting, Rieders said, were for civil rights cases, but since then it has expanded to employment, bad faith and numerous other areas.

According to Rieders, over the years courts have been presented with “more and more egregious circumstances,” and, while some circuits have previously determined that courts can award no fees for successful attorneys, the Third Circuit finally felt the line had been crossed in Clemens.

Best Practices

According to attorneys, there is case law specifying the fees that can be awarded in the various types of fee-shifting cases, and courts generally follow certain guidelines about how much documentary support there needs to be. However, there are no clear rules, and so recovery often varies from case to case, court to court and depending on the judge, each of whom might decide to follow a different set of case law.

However, attorneys agree that your best bet for retrieving all or most of the requested fees is to keep contemporaneous time sheets.

Kenneth Behrend of The Behrend Law Group, who said he has submitted hundreds of fee petitions, mostly in bad faith and consumer protection cases, said he keeps time sheets in every fee-shifting case he handles. The time sheets, he said, should break down to six-minute increments (a tenth of an hour), and should outline what type of work was done on what part of the case. Even during a trial, he said, he will outline how much time was spent examining a witness, and how long the witness was cross-examined.

“It takes a certain amount of discipline to do that correctly and keep yourself up to date,” he said. “When things get very hectic you still have to take a step back.”

Just as important, attorneys said, is doing a critical analysis to make sure you’re only requesting fees for which you can recover. It is important, attorneys said, to make sure you only bill for tasks that were related to successful claims, and not for any administrative activities, or anything the court might find redundant or excessive.

Both Behrend and Rieders also said they also keep track of the hours they have trimmed from the request, and note those hours in their petitions as a way to give the judge a fuller picture of the workload.

Behrend also said that the amount of the underlying recovery should not be used as a metric to evaluate how much attorney fees should be awarded. If a defendant puts on a multimillion-dollar case against a solo practitioner, raising novel legal issues and filing a mountain of motions, the plaintiff’s attorney still deserves to be compensated for his or her work, even if the amount at issue in the case was relatively small, he said.

“What are you supposed to do as a plaintiffs attorney? Not respond to their avalanche of motions? If you do you lose the case,” Behrend said. “It gets more complex. Rather than just a dollar amount, look at the actions and the amount of effort.”

According to Behrend, computer programs that track attorneys’ work can be tricky, as sometimes they can limit the amount of description that can be provided. Some judges, he said, are understanding of those limitations and allow attorneys to elaborate if necessary, while others may simply deny the request as insufficient.

Judges also may choose to award, or withhold, fees depending on whether they believe the attorney handled the case well, which can be a very subjective assessment.

“It’s a little bit of an art,” Behrend said.

Fallout

Rieders said he is worried that, after seeing high-profile cases like Clemens and Smith, some courts may begin to overly scrutinize the request to an unreasonable degree, questioning the amount of hours spent in discovery, or criticizing an attorney for not using a computer program to perform a certain task more quickly, for example.

One issue that is already becoming a concern, according to Rieders, is the trend of courts awarding different rates depending on the region within the state.

“I don’t want to see judges micromanaging honorable attorneys,” he said.

Defense attorneys, he said, could also use the recent opinions to litigate issues unnecessarily.

“We don’t want this to become a problem where, because of the bad behavior of a few people, we’re under scrutiny in a way that’s not fair,” Rieders said, adding that some defense attorneys are already “introducing within the fee-shifting field more and more things to litigate over.”

“One thing you never want to see is a fee-shifting request becoming a separate litigation. You don’t want it to turn into a separate trial,” he said.

Defense attorneys who spoke with The Legal said that, given the severity of the conduct underlying the two decisions, they did not think the rulings would have much applicability to cases going forward. However, they agreed that the cases serve as a strong reminder to the defense bar that if they aren’t vetting attorney fee requests, they should be.

“You can’t rely on the attorney making that fee claim to have vetted everything that’s in there. That due diligence can pay off in a significant reduction when the plaintiffs attorneys haven’t done what they need to do to make sure it’s a reasonable claim,” Kenneth Portner of Weber Gallagher Simpson Stapleton Newby & Fires said. “There’s a natural tendency to gild the lily. It could even be inadvertent.”