Archive of Current Developments in Legal Fees

Edited by Gary Greenfield, Founder, Litigation Cost Management

If you would like more information about any of these decisions or developments, or you have cases or information you would like to share with others, feel free to contact us.

Borland refused its legal fees and expenses (over $20 million) in successfully fighting off Lotus

Lotus Development Corp. v. Borland Int'l Inc., 6th Cir., Nos. 97-1399, 97-1857, May 15, 1998

Despite Borland International's successfully fending off Lotus Development Corp. in closely watched litigation regarding the protectability of aspects of software programs and despite the Supreme Court's prior ruling that a successful defendant is entitled to seek its attorneys' fees under the same standard as a successful plaintiff in copyright litigation, the Sixth Circuit Court of Appeals affirmed the trial court's determination that Borland should not recover its approximately $11 million in attorneys' fees, $7.5 million in expert fees, and $1.6 million in other costs incurred in the litigation. Among the charges Borland made to buttress its claim for fees was that Lotus commenced the litigation at least in part to "bankrupt Borland," pointing to press reports that Lotus intended to use the litigation to conduct a "cashectomy" on Borland. The argument did not prevail.

California Court of Appeals reverses $1.8 million attorneys' fees award in Weeks v. Baker & McKenzie

Weeks v. Baker & McKenzie, Cal.Ct.App., No. A068499, May 4, 1998

A California Court of Appeals proved more hospitable to actual damages ($50,000) and punitive damages ($3.5 million after reduction by the trial court) than to attorneys' fees ($921,565 before applying a multiplier.) The Court affirmed the damages awards but reversed the attorneys' fees in Weeks, a widely watched case alleging sexual harassment at a law firm. The Court did not find the hours billed or rates charged by the attorneys unreasonable (perhaps because the defendants did not challenge them), but found the trial court's application of a 1.7 multiplier to be inappropriate.

Comment: In finding the 1.7 multiplier excessive, the Court used a rationale which would seem to make it difficult to obtain a multiplier in any individual harassment or discrimination case–despite California's "liberal rule" regarding multipliers. However, the Court may have been heavily influenced by the fact that the plaintiff's law firm stood to receive forty percent of the damages awards as well as the unchallenged lodestar in attorneys' fees.

Bankruptcy Court shows it takes disclosure requirements seriously--slashes attorneys' fees and expenses $3 million due to failure to disclose and representation of adverse interests

In re Granite Partners, L.P., et al., Bankr.Ct., SDNY, Case Nos. 94 B 41683 through 41685 (SMB), March 9, 1998

The Bankruptcy Court for the South District of New York reduced fees and expenses sought by the special counsel to the Chapter 11 Trustee nearly $3 million, from $5,162,656.23 to $2,203,521.67, because the Court concluded that the firm had interests adverse to the estate and failed to provide adequate disclosure of them. The Court did not deny the fees sought in toto because the Court felt that the firm had performed valuable services to the estate and that allowing no compensation would be inequitable. The Court also reduced the fees sought by the Chapter 11 Trustee by $50,000 for failing to disclose to the Court what he had learned from the law firm about its relationship to a party that was subject to an investigation by the estate.

Comment: Deciding what and how much to disclose at the beginning of a case, when a firm is seeking a desirable assignment and there is a fear that disclosure of certain information would jeopardize obtaining the case, is not an uncommon situation. Here, the Court concluded that the firm's apparent effort to very carefully skate around its disclosure obligations jeopardized the integrity of the investigation it was hired to undertake.

Courts continue to struggle with–and disagree on–the recoverability of various cost or expense items often billed through to clients by law firms

Clarke v. Whitney, et al., USDC, EDPA, Civ. Action No. 95-1144, May 7, 1998

King, et al., v. Floyd County Board of Education, USDC, EDKY, No. 97-431, May 11, 1998

In these recent cases, the federal court in Pennsylvania ruled that computerized research expenses were properly recoverable as costs, while the federal court in Kentucky ruled that they were not.

The right hand better talk to the left hand – one state agency in a bankruptcy proceeding can waive sovereign immunity for another state agency and thereby make the latter liable for attorneys' fees

Wyoming Department of Transportation v. Straight , 10th Cir., No. 97-8053, June 19, 1998

Disagreeing with the 4th Circuit, the United States Court of Appeals for the 10th Circuit held that one state agency's filing of a proof of claim in a bankruptcy waived the state's sovereign immunity on claims arising out of the same transaction or occurrence, thus making another state agency liable for attorneys' fees for violating the automatic stay of the Bankruptcy Code.

Comment: The major issue was whether Congress's effort, set out in 11 U.S.C. Section 106, to remove 11th Amendment sovereign immunity for claims asserted by states in bankruptcy courts, survived the United States Supreme Court's 1996 decision in Seminole Tribe of Florida v. State of Florida. The 10th Circuit held that it did.

Contingent fee agreement sets cap for "reasonable attorneys' fees" under California's contractual attorneys' fees statute

Stafford v. Sipper, et al., Cal.Ct.App., No. B102770, July 21, 1998

In Stafford, a California Court of Appeals ruled that, where an attorney is working under a contingency fee agreement, the amount owed by the client under the contingency agreement caps the amount which can be awarded as "reasonable attorneys' fees" under a contract between the litigants. Thus, the trial court's award of over $300,000 as "reasonable attorneys' fees" was reversed because the amount owed under the contingency agreement (probably around $45,000 if the percentage in the contingency agreement was one-third) exceeded the amount awarded as "reasonable fees" by the trial court. Moreover, the Court of Appeals held that the trial court could award, as reasonable fees, less than the amount owed under the contingency agreement.

Comment: The net effect of this decision is that a contingency agreement provides the ceiling (but not the floor, nor the measure) for "reasonable attorneys' fees" under the common provision in many contracts awarding "reasonable attorneys' fees" to the winner of a dispute involving the contract. Presumably, lawyers can draft around this decision. It will be interesting to see if the principle behind this decision will be applied to other contexts where plaintiffs' lawyers often have contingency agreements but then seek statutory attorneys' fees in addition to their contingency when their clients win.

Size of the firm relevant in determining the appropriate rate to be awarded for attorneys' fees

Bick v. City of New York, et al., USDC, SDNY, No. 95 Civ. 8781, April 21, 1998

In Bick, a United States Magistrate held that, in determining the appropriate rate to be used in computing an award of attorneys' fees, the size of the firm seeking the fees is relevant, i.e, a lawyer from a small or medium-sized firm is entitled to a lower rate than one from a large firm because the large firm has higher overhead and thus must charge more.

Comment: Basing the rate to be awarded in part on the size of the firm would at first seem inappropriate. A court in lodestar cases is supposed to determine and use a rate which reflects the prevailing range of rates in the community "for similar services by lawyers of reasonably comparable skill, experience and reputation," a standard which does not mention the size of firm. However, from a practical standpoint, a lawyer's normal hourly rate is relevant and is often the most persuasive evidence on a fee motion (where the lawyer has hourly rate clients), and this will typically reflect the size of the firm.

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