Articles Posted in Attorney Fee Shifting Claims

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When faced with a lawsuit, many companies choose to settle the case outside of court if at all possible. This is because lengthy legal battles have gotten increasingly expensive over the years. If the company does not at least attempt to settle the case outside of court, then it could potentially find itself having to pay hundreds of thousands of dollars in attorney’s fees for the plaintiff in addition to the plaintiff’s award for damages.

This happened in a recent court battle between UPS and a former employee. The plaintiff, Kim Muniz, worked as a UPS Division Manager until she was demoted two levels to Supervisor. She sued UPS for discrimination and violation of California’s Fair Employment and Housing Act. According to Muniz’s complaint, UPS allegedly demoted Muniz, denied her a stock bonus, and placed her on a performance plan as a result of her gender and her age. Muniz alleged that the discrimination was traceable in part to UPS’s negligence in hiring and training its employees.

The jury ruled in Muniz’s favor and awarded her $27,280 in damages for her lost earnings, past medical expenses, and past non-economic loss. Because UPS managed to defeat all but one of Muniz’s claims, the jury awarded her only about 36% of the damages she had originally sought.

Under California’s Fair Employment and Housing Act, Muniz, as the “prevailing party” was entitled to an award of “reasonable attorney’s fees”. The surprise to UPS came when Muniz sought $1.95 million in attorney’s fees. The fee request consisted of the number of hours spent multiplied by the hourly rates, which brought the total to $1.3 million. That number was then multiplied by a 1.5 enhancement, bringing the total to $1.95 million.
The district court reduced the award of attorney’s fees by 20% because Muniz’s attorneys could not prove that they actually spent as many hours on the case as they claim to have spent. Because Muniz’s attorneys were unsuccessful in attaining an award of damages for their client for her age discrimination and retaliation claims, the court deducted another 10% from the attorney’s fees, bringing the total award to just under $700,000.

UPS appealed the fee award, claiming that Muniz’s claims for attorney’s fees were highly inflated. The case went to the Ninth Circuit Court of Appeals, which upheld the lower court’s initial award of attorney’s fees at almost $700,000. Although the appellate court could have further reduced the award, it chose not to based on the fact that neither Muniz’s attorneys nor UPS could differentiate between the hours that had been spent on Muniz’s unsuccessful claims and the time spent on her successful claims. Instead, the court remanded the case back to the trial court to reconsider the award of attorney’s fees.

The court’s decision in this case is not the only one to make an award for attorney’s fees which is substantially larger than the award for damages. Because of decisions like this one, companies facing a lawsuit would be advised to settle a case rather than run up fees. Doing so can benefit both parties to the lawsuit and avoid a situation where the plaintiff later obtains an attorney fee award which greatly exceeds the damages award.

You can view the Appellate Court’s decision here.

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When an attorney has been hired for a case for which he feels he might not be the best attorney for the job, there is frequently an allowance in his contract with the client for him to hire outside counsel to assist him in the case. Mr. Merenstein recently took advantage of this in the case of Mercantile Adjustment Bureau v. Flood in which he represented Flood.

Having lost her case in the county court, Flood filed an appeal. Merenstein, having little experience in appeals, hired an appellate attorney to argue the case for Flood. Flood lost the appeal and appealed again. For the second appeal, the appellate attorney resigned and Merenstein hired another law firm. Merenstein was working the case on a contingency basis, meaning he would get paid when Flood won the case. The appellate attorneys however, required advance payment and so Merenstein paid their fees with the understanding that Flood would pay him back with the money she won in court. Flood won her second appeal and the case was returned to the county court to determine the amount of damages she was due.

In a third appeal, Mercantile Adjustment Bureau (“MAB”) alleged that, by paying in advance for the attorneys representing Flood, Merenstein was violating the Rules of Professional Conduct which does not allow a lawyer to provide financial assistance to his client. However, the judge disagreed. The Rule provides an exception which states that a lawyer may provide financial assistance to his client in matters relating to the case. This includes reasonable attorneys’ fees and court costs. The judge therefore ordered MAB to pay the attorneys’ fees.

Flood then filed a request for attorneys’ fees incurred in the third appeal, which the court rejected. MAB filed an appeal on the Rules of Professional Conduct allegation and Flood filed an appeal against the judgment on her attorneys’ fees. Both cases were argued before the Colorado Supreme Court.

The Colorado Supreme Court agreed with the district court that an advance on attorneys’ fees was covered by the exception provided by the Rules of Professional Conduct. Regarding the matter of Flood’s attorneys’ fees for the third appeal, the Court had found that the district court had referred to an appellate law in delivering their judgment. A lower court is not permitted to use an appellate law in a judgment and so the court ordered the district court to return the case to the county court in order to determine the amount of attorneys’ fees Flood had accumulated in the third appeal.

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