EFFECTIVELY RECOVERING ATTORNEY S FEES

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1 EFFECTIVELY RECOVERING ATTORNEY S FEES So what I m going to do today is go through some of the procedural pitfalls in recovering fees and give you some practice tips that you can use whether you are seeking fees or opposing a request for fees. And I am going to focus mostly on recovering attorney s fees. It s simpler to talk about it from the angle of recovering fees, and hearing the pitfalls for recovering attorney s fees, that will also help you understand how to oppose attorney s fees. Finally, I should point out that because this is a national program I am going to focus on federal court, but most of these principles are going to apply in state court as well. But keep in mind that the law varies from circuit to circuit in federal court and some states do have their own unique procedures. For example, I m in Texas, and we like to do our own thing in Texas so our procedures for recovering fees are different from the federal approach. But I m going to go against the stereotype and not tell you how great Texas is, and focus on the procedures in federal court and most state courts. Starting point is a rule that does not vary from place to place in this country I. Starting Points for Recovering Attorney's Fees A. What substantive law authorizes an award of fees? and that is that we follow the American Rule. Meaning that unlike other parts of the world, the general rule in this country is that the prevailing party does not get fees. So you only get fees if the substantive law authorizes an award of fees. Several categories will run through these fairly quickly. (1) Federal statutes. Civil rights, antitrust, Fair Labor Standards Act, RICO. Sometimes Patent Act, Lanham Act (for trademark cases), Securities Act cases, ERISA. Some statutes are one-sided examples are the statutes in which consumers can get fees if they prevail but don t pay fees if they lose Truth in Lending Act, Fair Credit Reporting Act, Fair Debt Collection Practices Act. (2) Contracts. Contracts often say that if one party that has to sue to enforce the contract, they can recover fees. (3) Other state law in state court, or diversity action in federal court. In Texas we have a statute that says a prevailing plaintiff or defendant can get attorney s fees in contract cases, even if the contract does not mention fees. (4) What s known as the common fund exception. Class actions and interpleader suits

2 (5) Attorneys fees as sanctions. Rule 11, discovery sanctions, etc. Normally assessed against the litigant, but sometimes the lawyer. B. Who is the prevailing party? Most of the time, when substantive law allows for recovery of attorney s fees, it says fees can be recovered by the prevailing party. So the second question is who is the prevailing party? The Supreme Court says that for purposes of federal statutes, the plaintiff prevailed if [1] he succeeded on any significant issue in litigation and [2] he achieved some of the benefit the parties sought in bringing suit. [Hensley v. Eckerhart.] What does this mean? [1] Succeeded on any significant issue means a partial victory is a victory. [2] But achieved some of the benefit the parties sought means that a purely procedural victory is not a victory you have to get some relief. That raises the question, what if the plaintiff does recover some damages, but they are nominal damages? Courts generally hold that the plaintiff still prevailed, but this might be a ground for reducing or denying fees (more on that later). What about defendants? General rule of thumb every case has a prevailing party. If the plaintiff did not prevail, the defendant did. C. What is the applicable procedure? Third question what is the applicable procedure? If you re in federal court, you will look to Rule 54(d). But it is important to understand two things about Rule 54(d). One, and this is sometimes misunderstood, Rule 54(d) provides a procedure for requesting attorney s fees, but it does not authorize an award of attorney s fees. So you need a federal statute, or a contract, or some other substantive law that authorizes fees otherwise Rule 54(d) doesn t do you any good. The other important thing about Rule 54(d) is that it doesn t always govern the procedure, even in federal court. It is far too easy to assume, I found the rule of procedure, here is what I need to do. Most of the time that is true but not always

3 Let me give a couple of examples here. First, Rule 54(d) does not apply if the substantive law provides for the recovery of attorney s fees as an element of damages. For example, when you ve got a contract that is governed by state contract law, often the substantive law will say fees are recoverable as an element of damages. And so some courts will say that means you need to prove them up at trial like any other element of damages, submit a question to the jury, get a finding, and get the judge to include them in the judgment. And that is true even though Rule 54(d) talks about a procedure where you wait until after the trial has ended and the judge has signed a judgment before you request fees. Now, a lot of the time, we would rather prove up our fees to a judge because juries don t like to hear about how much we charge and we want them to focus on the case. But if the law says you can recover fees as an element of damages, the safer course, if you want to wait and do it at the end, is to try and get a stipulation that fee issues will be presented to the judge after the trial. Here is another example of when Rule 54(d) doesn t apply. Some federal statutes will set their own deadlines or procedural requirements, so those trump Rule 54(d). And sometimes state law will impose requirements on parties seeking fees, and it isn t clear whether those are substantive requirements that apply in federal court, or procedural requirements that don t apply in federal court. So here is my practice tip. Don t get too caught up in trying to figure out which procedure to follow. When in doubt, try to comply with both Rule 54(d) and any requirements found in the substantive law. Meet the shorter deadline, jump through all the hoops. It is easier than getting into debates later on about whether some other law trumped Rule 54(d). II. Best Practices for Motions for Attorney s Fees So you can t always assume Rule 54(d) applies, but let s say it does in your case. How do you file a fee application under Rule 54(d)? A. Deadline best practices Rule 54(d) says you need to request fees in a written motion, and you need to file it no later than 14 days after entry of judgment. Tip check local rules. Rule 54 says 14 days unless a statute or court order provides otherwise. Some courts say local rules are court orders, and some local rules have their own deadlines

4 Tip don t wait for postjudgment motions. There is some authority that if there is a motion for judgment as a matter of law or MNT pending, your 14 days don t start running until the motions are resolved. But here is the problem with that. Your deadline is 14 days, and postjudgment motions generally aren t due for 28 days. So if you sit around expecting your opponent to file a postjudgment motion, and they don t file one, you have blown your deadline. So always file within 14 days. Here is a related tip if you are opposing fees. A judgment has been entered against you, but the other side immediately files a motion for fees and that is pending. That does not prevent judgment from becoming final and appealable. So you need to do one of two things. First, you can go ahead and file your notice of appeal from the judgment, just like you would if there wasn t a pending motion for attorney s fees. Or two, Rule 58 says the district court can suspend the finality of the judgment when a party files a motion for fees. So if you want to wait and file a single notice of appeal after the court has resolved the fee issue, you need to ask the district court to suspend the finality of the judgment until he has resolved the fee issue. B. Content of the fee application So, what do you need to put in your Rule 54(d) motion? 14 days might not seem like a long time, and I think people think, wow, that doesn t give me much time to get everything together. But if you look at Rule 54(d), it really is not that demanding. The rule says your motion only needs to specify three things: The judgment entitling you to fees (easy); The grounds for the fee award identify the statute or other law that says you can recover fees in that type of case; and State or estimate the amount of the fee sought. And the important word there is estimate. You will eventually need proof, but the proof can be submitted later and need not be attached to the fee application. III. Effectively Using Evidence to Support Recovery of Fees And that brings us to the question of, when you do prove up fees, how you can best use evidence to support a request for fees. And the key point here is, if you want to maximize your fees, keep good billing records as you go and submit them to the court. Use actual timesheets even if you have the case on a contingent-fee arrangement

5 even if you are working pro bono, or you are a salaried in-house or government lawyer What if you are opposing fees, and you get the amount and say wow, that seems like a lot? You don t have to present evidence you can argue to the judge that the fees seem excessive, and if he agrees that the fees are excessive he can reduce them. But keep in mind that you can present evidence, and in the right case, you might even be able to take some discovery. That can include taking the deposition of the lawyer seeking fees. You can also request the fee agreement and the amount of compensation actually paid, because if the lawyer and client agreed to write off some of the fee, that is a pretty compelling argument that the fee wasn t reasonable. Sometimes people assume that is privileged, but to the extent they are privileged, submitting a motion for fees has been held to waive the privilege. Finally, should you have an evidentiary hearing? My experience has been, good luck getting one in federal court. (In my time as a federal law clerk, I never saw one.) Even in a complex case, will often be referred to a magistrate or special master as contemplated by Rule 54. In state court, hearings are more common, and if the party seeking fees doesn t request a hearing, if you are opposing the fee request you might want to get in front of the judge and explain why he shouldn t just rubber-stamp the fee request. A final tip if you do not prevail on the fee issue, request findings and conclusions. Rule 54 requires the court to provide findings and conclusions, and you will want them for appellate review. IV. Lodestar Method of Calculating Fees Lodestar method is required under all federal fee-shifting statutes. The lodestar method is a strict hourly method. The number of hours reasonably expended, times a reasonable rate. [Some state courts use a multi-factor approach. Federal courts get to the same thing by considering each factor as an adjustment to either hours or rate.] A. Hours Number of hours reasonably expended two components. First, the hours must have been expended. So if you spent 5 hours drafting a motion, it doesn t matter that most lawyers would have taken twice that long you are getting 5 hours. Second, the hours must have been reasonably expended. The principle here is that if you wouldn t bill them to client, can t bill them to your opponent

6 [Three general reasons that hours are not compensable excessive, redundant, unnecessary. Too many lawyers? Administrative tasks? Travel time? PR? Westlaw (different holdings on this).] B. Rate SCt tells us it should be in line with those prevailing in the community for similar services by lawyers of reasonably comparable skill, experience and reputation. The easiest way to prove this by proving that you charge clients the same rate in similar actions. [Rate in the community this raises the question, whose community? Answer is the court s community, unless there was a need to hire out-of-town counsel. So I ll pick on my hometown, which is the relatively small town of Normal, Illinois. If a New York lawyer handles a case in Normal, Illinois, he is going to get Normal rates instead of New York rates, unless he proves that it just wasn t possible to find a lawyer in Normal who could have done the job.] [ Reasonably comparable skill, experience, and reputation. Skill may be in ht eyes of the court. Experience and reputation may be based on CV, length of time in practice, status as partner or associate in law firm, etc.] The reasonable rate can be less than the actual rate or it can be more, if the attorney charged a reduced rate to generate goodwill with the client or because the attorney believes in the cause, etc. V. Contingent Fees So what if you had the case on a contingent fee basis? In federal court, if a federal statute authorizes fee-splitting award, still use the lodestar method. So you must show actual hours, or the judge may penalize you by reducing or denying fees. Contemporaneous time records are preferred, but in most courts, if you didn t track your time, reconstructions are OK. What you cannot do, is tell the court that it should award a percentage of the recovery. You also can t ask the judge to adjust the lodestar fee upwards to account for the fact that it was a contingent-fee arrangement, so you took a risk that you would not be paid. The Supreme Court held in City of Burlington v. Dague that a court may not enhance the lodestar to reflect the fact that the movant s counsel was retained on a contingent-fee basis. But outside of federal fee-shifting statutes, courts do not have to use the lodestar method, so they are free to adjust a fee to reflect counsel s risk of not getting paid, and many state and federal courts are willing to do so

7 VI. Ethically Minimizing Non-recoverable Fees The issue here comes up when you prevailed on some claims but not others, or you prevailed on some claims for which you can get fees, and some claims (like tort claims) that do not entitle you to fees. In theory, you are supposed to segregate the fees between the fees incurred to prosecute the recoverable claims, and the fees incurred on the other claims. In practice, we all know it s not that easy. So if you re trying to recover fees, you will likely want to argue that all of the claims were intertwined. I think every court recognizes that sometimes, two claims are so intertwined that the work relates to them both, and the fees for that work are recoverable. Tip the party seeking fees should focus on the facts. Oftentimes, all the claims relate to the same facts. Tip the party opposing fees should focus on the nature of the legal services. Even when all the claims arise from the same occurrence, they are based on different law, so they require different research and different discovery geared to the elements of each claim. [Defeating affirmative defenses and counterclaims. The party seeking fees will argue that it needed to defeat a affirmative defenses and counterclaims to fully recover on its own claim. Fees incurred to defeat affirmative defenses are recoverable. For counterclaims, the issue is how closely the counterclaim is related to the recoverable claim.] My other tip here is to have an understanding of what the consequences will be if you are required to segregate your fees, but you fail to do so. In some courts, if you don t segregate your fees, you can t recover fees. But in other courts, including some federal courts, the court will just fall back to a more intuitive approach, and try to come up with a fee that seems right based on the results. Depending on your case, that might be a good thing for you, or a bad thing but either way, you will want to know what approach your court takes if you cannot segregate your fees. VII. Recovering Post-Trial & Appellate Fees Post-trial fees. Straightforward. Estimate them or wait until the court has resolved post-trial motions. A federal court can defer a ruling on a motion for fees until after the judgment on the merits is final and in the court of appeals. Appellate fees more questions than answers. Practice tip request appellate fees under Rule 54(d), appeal from denial of fees, ask court of appeals to award appellate fees or remand so that district court may award fees

8 VIII. Appealing and enforcing a fee award A judgment awarding or denying attorney's fees is a final, appealable judgment. It may be appealed separately from the merits judgment. (But you cannot appeal from an order that assesses recoverability but not amount, or vice versa. And you cannot appeal from a prejudgment, interim award of fees.) A fee judgment is a money judgment, and can be enforced like any other money judgment. And that is probably as good a transition as any to our next topic today, which is enforcing judgments