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Vol. 7 - Issue 8
November 7, 2018


Note To Policyholder Attorneys: How Not To Seek Fees (Do Not Miss This -- Trust Me)

I love this case. You will too. If there were a Saturday Night Live skit, of a policyholder counsel filing a fee petition – think John Belushi as the lawyer -- Clemens v. N.Y. Cent. Mut. Fire Ins. Co., No. 17-3150 (3d Cir. Sept. 12, 2018) would be it.

A jury awarded Bernie Clemens $100,000 in punitive damages, under Pennsylvania’s bad faith statute, in connection with a UIM claim. The ins and outs of that claim are not important (and the court does not even address them).

Following the award, Clemens, as a prevailing party under the bad faith statute, submitted a petition for attorney’s fees in an amount just shy of $950,000. The District Court, in a 100 page opinion, reviewing every time entry, concluded that the request was “outrageously excessive” and awarded no fees whatsoever. Zip. Nada. The case went to the Third Circuit which affirmed the award of no fees. Zilch. Goose egg. The Third Circuit, in a case of first impression for it, followed other circuits which have held that a District Court has the discretion to deny a fee request -- in its entirety -- when the requested amount is “outrageously excessive.”

The rationale for this rule, as explained by the court, is as follows: “Underlying these decisions is the idea that if courts did not possess this kind of discretion, claimants would be encouraged to make unreasonable demands, knowing that the only unfavorable consequence of such conduct would be reduction of their fee to what they should have asked for in the first place. We find this rationale persuasive. When a party submits a fee petition, it is not the ‘opening bid in the quest for an award.’ Rather, it is the duty of the requesting party to make a good faith effort to exclude . . . hours that are excessive, redundant, or otherwise unnecessary, just as a lawyer in private practice ethically is obligated to exclude such hours from his fee submission.” (citations omitted).

So what was it that caused the District Court, and then the Third Circuit, to conclude that the fee request was “outrageously excessive?” Here’s where the fun begins. I’ll let the Third Circuit describe the billing entries that it frowned upon.

“As a starting point, counsel did not maintain contemporaneous time records for most of the litigation. Instead, by their own admission, counsel ‘recreate[d]’ all of the records provided as part of the fee petition, using an electronic case management system that did not keep track of the amount of time expended on particular tasks. Even worse, the responsibility of reconstructing the time records was left to a single attorney, who retrospectively estimated not only the length of time she herself had spent on each individual task, but also the amount of time others had spent on particular tasks, including colleagues who could not be consulted because they had left the firm by the time the fee petition was filed.”

That’s good. But the court was just gettin’ warmed up.

“[M]any of the time entries submitted were so vague that there is no way to discern whether the hours billed were reasonable. Counsel’s time records included, for instance, entries billing for attorney services described as ‘Other,’ ‘Communicate,’ or ‘Communicate-other.’ Similarly, the fee petition included a number of entries for ‘Attorney review,’ ‘Analysis/Strategy,’ or ‘Review/analyze’ with no additional explanation regarding the subject or necessity of the review. We are mindful of confidentiality obligations, but time entries still must be specific enough to allow the district court to determine if the hours claimed are unreasonable for the work performed.”

I can understand a court not accepting “Other” or “Communicate” as acceptable billing entries. But to take issue with the one-two punch of “Communicate-other” is really outrageous.

The court continued…

“In addition to the vague entries, some entries were, on their face, unnecessary or excessive. For example, over the course of one week, and at the same time counsel were billing for trial preparation, counsel billed a total of sixty-four hours for ‘Transcripts/clips.’ Whatever this means, we are confident that it was not necessary to spend sixty-four hours on it given the straightforward nature of the case. Of a similar vein are the frequent entries that requested attorney rates for ‘File maintenance,’ ‘File management,’ and ‘Document management,’ some of which were for as long as seven hours in a single day. Without more information, these tasks appear ‘purely clerical’ in nature and should not be billed at a lawyer’s rate—nor for many hours at a time.”

“Then there are the staggering 562 hours that counsel billed for ‘Trial prep’ or ‘Trial preparation’ with no further description of the nature of the work performed. We agree with the District Court that this is an ‘outrageous’ number under the circumstances. As the District Court put it, ‘[i]f counsel did nothing else for eight hours a day, every day, [562 hours] would mean that counsel spent approximately 70 days doing nothing but preparing for trial in this matter.’ Yet the trial consisted of only four days of substantive testimony, and involved a total of only five witnesses for both sides. The sole issue was whether NYCM had acted in bad faith in its handling of Clemens’s UIM claim. Counsel certainly have an obligation to be prepared, but we simply cannot fathom how they could have reasonably spent such an astronomical amount of time preparing for trial in this case, and we highly doubt they would have billed their own client for all of the hours claimed.”

We now arrive at my favorite part:

“All the more troubling is the fact that counsel’s (supposedly) hard work did not appear to pay off at trial. As the District Court explained, counsel had ‘to be repeatedly admonished for not being prepared because he was obviously unfamiliar with the Federal Rules of Evidence, the Federal Rules of Civil Procedure and the rulings of th[e] court.’ Given counsel’s subpar performance and the vagueness and excessiveness of the time entries, the District Court did not abuse its discretion in disallowing all 562 hours.”

With facts like these the case is seemingly (you would hope) an outlier. However, despite the truth-is-stranger-than-fiction aspect to it, the decision does include some valuable discussion, and case citations, concerning the proper manner for a prevailing party to submit a fee petition.


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