A business named “Renegade Swish” sued Wright in Texas state court for breach of an employment agreement. Wright counterclaimed for violations of the FLSA. For reasons not explained in the opinion, Swish then nonsuited its contract claims, moved to realign the parties so it would be the new defendant, and removed the case to federal court based on federal jurisdiction. The Fifth Circuit held that Swish lacked an objectively reasonable basis for removal, citing both precedent (primarily, Holmes Group, Inc. v. Vornado Air Circulation Systems, Inc., 535 U.S. 826 (2002)), and the text of 28 U.S.C. § 1441(a), which refers to removal by “defendants.” The Court did not credit Swish’s reliance on the pending motion to realign, declining to “invite federal courts to dream of counterfactuals when actual litigation has defined the parties’ controversy,” and rejected the cases cited by Swish as not presenting a meaningful conflict: “As compared to [a controlling case]m where the disagreement among the courts was ‘hotly contested,’ any disagreement here is tepid and lopsided.” Renegade Swish v. Wright, No. 16-11152 (May 22, 2017).
In DeLeon v. Abbott, the Fifth Circuit affirmed an award of $585,470.30 in attorneys’ fees and $20,202.90 in costs arising from the Texas counterpart to Obergefell v. Hodges, 135 S. Ct. 2584 (2015). The panel majority observed that “the essential goal in shifting fees (to either party) is to do rough justice,” and that as a result, “[w]e can hardly think of a sphere of judicial decisionmaking in which appellate micromanagement has less to recommend it.” A dissent, observing that “deference is a blank check,” approved of the bulk of the award but took issue with it as to time spent on (a) an unsuccessful third-party motion to intervene; (b) interacting with the media; and (c) coordinating with supportin amici. No. 15-51241 (April 18, 2017, unpublished).
Defendants won an intellectual property dispute with Plaintiff, and then sought recovery of $1 million in attorneys fees. This request led to the surprisingly complicated question of exactly what claims were in the case when the Defendants won. The Fifth Circuit concluded: “The [Texas Theft Liability Act] claim in the [First Amended Complaint]–the operative complaint at
the time of the attorneys’ fee award—was never held to be preempted [by federal copyright law]. [Our earlier opinion on the merits] addressed only the TTLA claim as it was pleaded in the Original Petition and did not consider the TTLA claim in the FAC. This is significant because the TTLA claim in the FAC was distinct from that in the Original Petition and specifically omitted allegations that were equivalent to copyright, with the intention of avoiding preemption. And the district court also never held that the FAC’s TTLA claim was preempted. Rather, the TTLA claim in the FAC was litigated and dismissed on the merits during summary judgment, and therefore it was proper to award attorneys’ fees under the TTLA because that law supplied the rule of decision.” Spear Marketing v. Bancorpsouth Bank, No. 16-10155 (revised Jan. 12, 2017). This opinion echoes the complexity in other recent cases that addressed the substance of preemption issues involving federal copyright law.
In LLOG Exploration Co. v. Signet Maritime Corp., after affirming a declaratory judgment about delay damages under a maritime towage contract, the Fifth Circuit found that it lacked jurisdiction over the related award of attorneys’ fees: “[I]n its award of fees and costs to LLOG, the district court did not set a set a specific amount. This court held in S. Travel Club, Inc. v. Carnival Air Lines, Inc., 986 F.2d 125, 131 (5th Cir. 1993), ‘that an order awarding attorney’s fees or costs is not reviewable on appeal until the award is reduced to a sum certain.'” No. 15-31123 (Dec. 23, 2016, unpublished).
Baker sued DeShong under the Lanham Act about use of the phrase “HIV Innocence Group,” in connection with advocacy programs for individuals accused of infecting others with HIV. DeShong won and sought an award of attorneys fees. The Fifth Circuit concluded that after Octane Fitness v. Icon Health & Fitness, 134 S. Ct. 1749 (2014) (a patent case, but analogous to the similar Lanham Act provision), an award of fees to a defendant was not limited to bad faith and did not require a “clear and convincing” showing. To qualify as an “exceptional” case that justifies a fee award, the court should consider a “nonexclusive’ list of ‘factors,’ including ‘frivolousness, motivation, objective unreasonableness (both in the factual and legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence.” Baker v. DeShong, No. 14-11157 (May 3, 2016).
The Fifth Circuit remanded to calculate an attorney fee award when: “At nearly every turn, this Department of Labor investigation and prosecution violated the department’s internal procedures and ethical litigation practices. Even after the DOL discovered that its lead investigator conducted an investigation for which he was not trained, concluded Gate Guard was violating the Fair Labor Standards Act based on just three interviews, destroyed evidence, ambushed a low-level employee for an interview without counsel, and demanded a grossly inflated multi-million dollar penalty, the government pressed on. In litigation, the government opposed routine case administration motions, refused to produce relevant information, and stone-walled the deposition of its lead investigator.” Gate Guard Services v. Perez (Secretary, Department of Labor), No. 14-40585 (July 2, 2015, unpublished).
Disputes between borrowers and mortgage servicers are common; jury trials in those disputes are rare. But rare events do occur, and in McCaig v. Wells Fargo Bank, 788 F.3d 463 (5th Cir. 2015), a servicer lost a judgment for roughly $400,000 after a jury trial.
The underlying relationship was defined by a settlement agreement in which “Wells Fargo has agreed to accept payments from the McCaigs and to give the McCaigs the opportunity to avoid foreclosure of the Property; as long as the McCaigs make the required payments consistent with the Forbearance Agreement and the Loan Agreement.” Unfortunately, Wells’s “‘computer software was not equipped to handle’ the settlement and forbearance agreements meaning ‘manual tracking’ was required.” This led to a number of accounting mistakes, which in turn led to unjustified threats to foreclose and other miscommunications.
In reviewing and largely affirming the judgment, the Fifth Circuit reached several conclusions of broad general interest:
- The “bona fide error” defense under the Texas Debt Collection Act allows a servicer to argue that it made a good-faith mistake; Wells did not plead that defense here, meaning that its arguments about a lack of intent were not pertinent to the elements of the Act sued upon by plaintiffs;
- The economic loss rule did not bar the TDCA claims, even though the alleged misconduct breached the parties’ contract: “[I]f a particular duty is defined both in a contract and in a statutory provision, and a party violates the duty enumerated in both sources, the economic loss rule does not apply”;
- A Casteel – type charge issue is not preserved if the objecting party submits the allegedly erroneous question with the comment “If I had to draft this over again, that’s the way I’d draft it”;
- The plaintiffs’ lay testimony was sufficient to support awards for mental anguish; and
- “[A] print-out from [plaintiffs’] attorney’s case management system showing individual tasks performed by the attorney and the date on which those tasks were performed” was sufficient evidence to support the award of attorneys fees.
A dissent took issue with the economic loss holding, and would find all of the plaintiffs’ claims barred; “[t]he majority’s reading of these [TDCA] provisions specifically equates mere contract breach with statutory violations[.]”
Dan Peterson sued his former employer, Bell Helicopter Textron, for age discrimination under the TCHRA. The jury found that age was a motivating factor in his termination, but also found that Bell would have terminated him even without consideration of his age. The district court awarded no damages, but imposed an injunction on Bell about future age discrimination, and awarded Peterson attorneys fees of approximately $340,000. The Fifth Circuit reversed. Noting that the TCHRA allowed an injunction even in light of the unfavorable causation finding, the Court found that plaintiff’s request came too late, as Fed. R. Civ. P. 54(c) “assumes that a plaintiff’s entitlement to relief not specifically pled has been tested adversarially, tried by consent, or at least developed with meaningful notice to the defendant.” Here, Bell showed that it would have tried the case differently had it known an injunction was at issue. Accordingly, the fee award was also vacated. Peterson v. Bell Helicopter Textron, Inc., No. 14-10249 (June 4, 2015). A revised opinion honed the opinion’s analysis as to a potential alternative ground of fee recovery; the same day it issued, the full Court denied en banc review over a lengthy dissent.
A law firm sought $130,000 in fees for representing a bankruptcy debtor; the bankruptcy court awarded $20,000, noting the firm’s lack of success in delivering a measurable benefit to the estate. While a Fifth Circuit panel affirmed, citing the test in In re: Pro-Snax Distributors, Inc., 157 F.3d 414 (5th Cir. 1998), all three judges called for en banc reconsideration of that opinion. That request was granted unanimously in Barron & Newburger, P.C. v. Texas Skyline, Ltd., which recognized that the “retrospective, ‘material benefit’ standard enunciated in Pro–Snax conflicts with the language and legislative history of § 330, diverges from the decisions of other circuits, and has sown confusion in our circuit.” Accordingly, the full Court overturned Pro–Snax’s attorney’s-fee rule to “adopt the prospective, ‘reasonably likely to benefit the estate’ standard endorsed by our sister circuits.” While the division of some en banc votes can offer insight on subtle aspects of judges’ philosophies, this unanimous decision shows that sometimes, the full court will simply fix what it regards as an earlier mistake, if that mistake has sufficiently far-reaching consequences within the Circuit.
A law firm and its client arbitrated a fee dispute. While the arbitrators ruled for the firm, the district court vacated the award as to the contingent fee on the grounds that the fee was unconscionable. The Fifth Circuit reinstated the arbitration award, noting the “extraordinarily narrow” standard of review and the arbitrators’ specific fact findings on the relevant considerations. Campbell Harrison & Dagley LLP v. Hill, No. 14-10631 (April 2, 2015, unpublished). The Court acknowledged, but concluded that it did not need to address, the question whether the ability to vacate an arbitration award on public policy grounds survived Hall Street Associates v. Mattel, 128 S. Ct. 1396 (2008).
Many personal injury claims are resolved by a “structured settlement,” in which the plaintiff receives a large sum in installments over his or her lifetime. Symetra is a company that contracts with tort defendants to fund those settlements. Rapid is a company that offers large lump sum payments to the beneficiaries of those settlements, seeking to profit by the time value of money. In many states, offers such as Rapid’s are regulated by Structured Settlement Payment Acts (“SSPAs”), and Rapid’s noncompliance with those laws gave rise to Symetra Life Ins. Co. v. Rapid Settlements, Ltd., No. 13-20412 (Dec. 23, 2014).
The trial court found that when Rapid had a dispute with an annuitant, it invoked an arbitration right that “w[as] a sham — designed to circumvent the SSPA’s exclusive method for transferring future payments.” The first issue on appeal related to the accompanying award of attorneys fees. The Fifth Circuit remanded for further consideration under Texas law, focusing on the distinction between claims involving present disputes with annuitants (fees allowed), and for future injuctive relief (not allowed). The Court also held that attorneys fees were recoverable as direct damages on Symetra’s claims for tortious interference, when it was “completely foreseeable” to Rapid that its arbitration practices would involve Symetra in state court litigation.
A large group of Dallas firefighters and police officers, involved in class action litigation against the City, filed a declaratory judgment action in the bankruptcy case of a law firm that had once represented them. They sought a declaration that neither the firm, nor the bankruptcy trustee, continued to represent them in their litigation or was entitled to any fee in that litigation. Caton v. Payne, No. 13-41182 (July 16, 2014, unpublished). After reminding in a lengthy footnote one that the final judgment rule for bankruptcy appeals is viewed “in a practical, less technical light,” the Fifth Circuit nevertheless agreed that the appeal from the ruling on that declaration was not ripe: “It is undisputed that the Class Action Lawsuits remain pending, that no recovery has been made, and that there may never be a recovery, which would preclude any contingent fee award as to which [bankrupt firm] (through the Trustee) may or may not be entitled to a share. Moreover, the Trustee has not yet demanded a fee, or threatened legal action to recover a fee.”
A law firm appealed the partial denial of its bankruptcy fee application. The bankrupty court said “its ruling was informed by the bad conduct of the Debtors themselves, which should have lead [the firm] to withdraw from the case sooner than it ultimately did.” The district court said the record showed that “this bankruptcy proceeding was doomed at the outset, and arguably could not have been filed in good faith under Chapter 11.” Barron & Newburger, P.C. v. Texas Skyline, Ltd., No. 13-50075 (July 15, 2014). The Fifth Circuit affirmed, noting that its earlier opinion of In re: Pro-Snax Distributors, Inc., 157 F.3d 414 (5th Cir. 1998) rejected a “reasonableness” test in the application of Bankruptcy Code § 330 — which would have asked “whether the services were objectively beneficial toward the completion of the case at the time they were performed” — in favor of a “hindsight” approach, asking whether the professionals’ work “resulted in an identifiable, tangible, and material benefit to the bankruptcy estate.” That said, all three panel members joined a special concurrence asking the full Court to reconsider Pro-Snax en banc, observing that its outright rejection of forward-looking reasonableness “appears to conflict with the language and legislative history of § 330, diverges from the decisions of other circuits, and has sown confusion in our circuit.”
Aspen Technology Inc v. M3 Technology Inc. affirmed an $11 million judgment in a suit to enforce a noncompetition agreement. Nos. 12-20388 & 13-20268 (May 29, 2014, unpublished). Most of the grounds are fact-specific and substantially influenced by spoliation matters. On a key copyright issue, the Court held: “Aspen’s registration of its derivative materials permits Aspen to bring a claim that M3 had infringed preexisting versions of its software,” aligning the Fifth Circuit with several other courts that have addressed the point. The Court removed roughly $500,000 in attorneys fees arising in prior litigation from the award for tortious interference, noting that the opposing party in that litigation was also a party in this case, removing the fee claim from the “equitable exception” to the rule that a contract or statute must allow recovery of fees.
At issue in Asarco v. Baker Botts. L.L.P. was a fee enhancement associated with an exceptional recovery in fraudulent transfer litigation for a bankruptcy estate. No. 12-40997 (April 30, 2014). The Fifth Circuit credited the bankruptcy court’s detailed findings about the quality of the law firms’ work and the “rare and extraordinary” result. In so doing, the Court reminded that “[b]ecause this court, like the Supreme Court, has not held that reasonable attorneys’ fees in federal court have been ‘nationalized,’ the bankruptcy court’s charts comparing general hourly rates of out-of-state firms and rates charged in cases pending in other circuits are not relevant.” The Court rejected the firms’ request for compensation from the estate for defending their fee applications, reasoning that the Code had sufficient protections against vexatious litigation, and declining to further expand the American Rule about defendants’ fees.
Payne sued Progressive Financial for violations of fair debt collection statutes, seeking statutory damages, actual damages, attorneys fees, and costs. Payne v. Progressive Financial Services, No. 13-10381 (April 7, 2014). Progressive made a Rule 68 offer of $1,001 in damages and fees to the date of the offer, to which Payne did not respond. The district court reasoned that Payne had not pleaded a basis to recover actual damages, and that the unaccepted offer mooted her claim for statutory damages because it exceeded the amount she could recover. The Fifth Circuit reversed, finding that the district court’s analysis of the actual damages claim conflated jurisdiction with resolution of the merits; accordingly, Progressive’s offer was incomplete because it did not address actual damages. A footnote reminds that a complete Rule 68 offer can moot a case, and that the Court did not reach the argument that the offer was incomplete because it did not include post-offer fees and costs.
In Richardson v. Wells Fargo, a mortgage servicer sought recovery of attorneys fees pursuant to a provision in the deed of trust that referred to “paying reasonable attorneys’ fees to protect its interest in the Property and/or rights under this Security Instrument.” No. 13-10002 (Jan. 24, 2014). The issue was whether a Rule 54(d)(2) motion was an appropriate vehicle to make its claim, which turned on “whether the fees are an element of damages or collateral litigation costs.” The Fifth Circuit concluded this provision defined legal fees as collateral costs, not “an independent ground of recovery” where Rule 54 might become inapplicable. The Court went on to hold that “motions for attorney’s fees provided by contract are permissible under Rule 54(d)(2)” after reviewing and rejecting authority that suggested otherwise. (For thorough review of when fees become damages in their own right under Texas law, and other key points about fee awards, please consult “How to Recover Attorneys Fees in Texas” by my colleagues Trey Cox and Jason Dennis.)
The City of Alexandria settled a lawsuit with an electricity supplier for a $50 million recovery. A sordid dispute then broke out among the City and various lawyers who worked on the case and asserted a contingency interest in the recovery. City of Alexandria v. Brown, No. 12-30823 (Jan. 15, 2014). The opinion, which affirms the district court’s resolution of the dispute, provides an overview of when “quantum meruit” principles control over the terms of a contingent fee agreement. As to one lawyer, relevant factors included the end of her involvement relatively early in the matter, and seemingly unreliable time records during that involvement. As to another, the court noted that the contract created a “joint obligation” between him and another lawyer that became impossible of performance after he was disbarred, requiring a quantum meruit analysis. (A related appeal was disposed of later in the year in deference to this panel opinion.)
After a recent example of attorneys fees that were not “inextricably intertwined” under Texas law, the Fifth Circuit followed this month with a practical example of the Texas requirement of “presentment” of a contract claim before fees may be recovered. In Playboy Enterprises, Inc. Sanchez-Campuzano, the Court reminded that the pleading of presentment is procedural, and thus not a requirement in the federal system. No. 12-40544 (Dec. 23, 2013, unpublished). It is, however, a substantive requirement. In this case, sending a “Notice of Default” under a primary obligation was enough to “present” a claim for liability on a guaranty, noting the “flexible, practical understanding” of the requirement by Texas courts. The Court distinguished Jim Howe Homes v. Rodgers, 818 S.W.2d 901 (Tex. App.-Austin 1991, no writ), which found that service of a DTPA complaint was not presentment of a later-filed contract claim, on the ground that the “Notice” here went beyond mere service of a pleading. For thorough review of this principle, and other key points about fee awards, please consult the book “How to Recover Attorneys Fees in Texas” by my colleagues Trey Cox and Jason Dennis.)
New York Life v. Cannatella involved the interpleader of life insurance benefits. The Fifth Circuit affirmed the award of $750 in attorneys fees to the insurance company who filed the action, agreeing that the company was “disinterested,” and identifying these factors about a fee award to a party in its position: “1) whether the case is simple or involved; 2) whether the stakeholder performed any unique services for the claimants or the court; 3) whether the stakeholder acted in good faith and with diligence; 4) whether the services rendered benefited the stakeholder; and 5) whether the claimants improperly protracted the proceedings.” No. 12-30663 (Dec. 23, 2013, unpublished).
Plaintiffs sued Blackburn for breach of contract with respect to three promissory notes and for fraud in a stock transaction. Highground, Inc. v. Blackburn, No. 13-30248 (Sept. 25, 2013, unpublished). Plaintiffs recovered on the notes but not the fraud claim, and the bankruptcy court awarded $25,000 as a “fair fee” for that result. Plaintiffs appealed, seeking fees for the fraud claim as well, arguing that their litigation was “inextricably intertwined” with the note claims. Applying Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299 (Tex. 2006), the Fifth Circuit agreed with the lower court: “Appellants prevailed on the notes claim because Blackburn signed the notes without authority to do so, not because of the allegations of fraud relating to other aspects of the purchase agreement . . . .” The case presents a clean example of claims against the same party that are nevertheless not “inextricably intertwined” for purposes of an attorneys fee award. (For thorough review of this principle, and other key points about fee awards, please consult the book “How to Recover Attorneys Fees in Texas” by my colleagues Trey Cox and Jason Dennis.)
The plaintiff in a personal injury case was found to be judicially estopped from asserting the claim because it was not properly disclosed in her personal bankruptcy, even though it arose post-petition. Flugence v. Axis Surplus Ins. Co., No. 13-30073 (Oct. 4, 2013). The trustee, however, could pursue the claim and its counsel could recover professional fees. Accordingly, the Court declined to declare that the trustee’s recovery was capped at the amount owing to creditors. (applying Reed v. City of Arlington, 650 F.3d 571 (5th Cir. 2011) (en banc)).
In Kenyon International Emergency Services, Inc. v. Malcolm, the Fifth Circuit found no abuse of discretion in an award of attorneys fees under a Texas statute to the defendants in a suit to enforce a noncompetition agreement. No. 12-20306 (May 14, 2013, unpublished). The Court clarified that “the key determination is [plaintiff’s] knowledge of reasonable limits, not . . . its knowledge of the reasonableness of the agreement” (emphasis in original). As it saw the record, the plaintiff’s CEO testified that the restrictions “were worldwide, overreaching in scope of activity, and basically indefinite in time.” The Court also reversed a sanction on the plaintiff’s lawyer related to the unsealed filing of a “sexually-explicit Internet chat,” reminding that “[i]ssuing a show-cause order is a mandatory prerequisite to imposing monetary sanctions sua sponte,” and finding that the lawyer did not have an improper purpose in making the filing and thus did not fall within Rule 11.
The appellants in Texas Medical Providers v. Lakey sought $60,000 in attorneys fees after successful defense of civil rights claims about new abortion laws. No. 12-50291 (Feb. 26, 2013, unpublished). The Fifth Circuit rejected a request based on 42 U.S.C. § 1988, noting: “Lack of merit does not equate to frivolity . . . .” The Court also rejected a request based on inherent power, which relied upon statements by plaintiff’s counsel that they dismissed several challenges because the initial Fifth Circuit panel had declared all future appeals in the case would be heard by the same panel. It stated: “The short answer to this charge is that if courts treated as a willful abuse of process every self-serving statement of counsel at the expense of a judge or judges, there would be no end to sanctions motions.”
The judgment debtors in Seven Arts Pictures v. Jonesfilm were found in civil contempt for failure to answer postjudgment discovery and other issues about enforcement of a judgment. No. 11-31124 (Feb. 18, 2013, unpublished). The Fifth Circuit affirmed, finding that the district court had general personal jurisdiction over the debtors, that the debtors had waived arguments about the orders by not timely and properly objecting below, and that the district court did not abuse its discretion in awarding $21 thousand in attorneys fees. While the holdings on jurisdiction, waiver, and attorneys fees draw heavily from the specific facts of the case, the legal framework used is of broad applicability. Footnote 7 acknowledges the unusual procedural posture of the jurisdiction issue, which had not been raised until after the notice of appeal was filed.
Earlier this year, the Fifth Circuit affirmed a fee enhancement in the Pilgrim’s Pride bankruptcy pursuant to section 330 of the Code. In ASARCO LLC v. Barclays Capital, the Court reversed an enhancement under section 328. No. 11-41010 (Dec. 11, 2012). “Section 328 applies when the bankruptcy court approves a particular rate . . . at the outset of the engagement, and § 330 applies when the court does not do so.” Id. at 13. A “necessary prerequisite” to section 328 enhancement is that the professional’s work was “not capable of anticipation.” Here, the Court found that the length of the ASARCO bankruptcy and the exodus of its employees after filing led to “commendable” work by Barclays that was still “capable of being anticipated.” See id. at 19 (analogizing Barclays to a car buyer who finds a new Corvette “needed far more than a car wash”).
A consumer group sued under the Clayton Act about the market for funeral caskets, and then settled all compensatory damages with one of the defendants. Funeral Consumers Alliance v. Service Corp. Int’l, No. 10-20719 (Sept. 13, 2012). The Fifth Circuit held that, even after that settlement, the group had standing to proceed against the remaining defendants for attorneys fees. Id. at 4-14. Noting, however, that “[t]he fact that death is inevitable is not sufficient to establish a real and immediate threat of future harm,” the Court found no standing for injunctive relief. Id. at 15, 18. The Court also affirmed the denial of class certification, finding that the scope of the putative nationwide class fit poorly with the evidence of localized market activity for funeral services and casket sales. Id. at 27 (distinguishing United States v. Grinnell Corp., 384 U.S. 563 (1996)).
The bankruptcy court in CRG Partners v. Neary awarded a $1 million fee enhancement for a “rare and exceptional” result in the Pilgrim’s Pride bankruptcy. No. 11-10774 (Aug. 10, 2012). The Trustee objected, arguing that Perdue v. Kenny A. ex rel Winn, 130 S. Ct. 1662 (2010) — a case rejecting a comparable enhancement under 42 U.S.C. § 1988 — impliedly overruled older Fifth Circuit authority that allowed them in bankruptcy. The Court carefully reviewed Perdue under the “rule of orderliness,” a set of principles that guide a panel’s fidelity to older panel opinions, and found Perdue distinguishable factually and for policy reasons. Op. at 22-25. The Court reminded that it had recently reached a similar conclusion as to the effect of Stern v. Marshall, 131 S. Ct. 2594 (2011), on magistrate jurisdiction.
Chevron sued Aker Maritime and Oceaneering International in connection with bolt failures on an offshore drilling rig. Chevron USA v. Aker Maritime Inc., No. 11-30369 (July 31, 2012). Chevron recovered a significant damage award against both defendants, and Aker sought indemnity from Oceaneering. Id. at 4. To recover under the indemnity provision, Aker had to establish that it was an agent of Chevron with respect to Oceaneering’s work. The Court concluded that Aker was an agent with respect to the specific activity of procurement, which it found “extends beyond Aker’s mere ordering and includes the receipt of the bolts.” Id. at 8.
In Waldron v. Adams & Reese, LLP, the largest creditor of a bankruptcy debtor paid the retainer fee for debtor’s counsel. No. 11-30462 (March 29, 2012). That payment was not disclosed for some time, after which the trustee sought to disgorge counsel’s fees on the grounds of a disqualifying conflict of interest. The Court affirmed the lower court’s rulings, finding no disqualifying conflict on the “specific facts of [the] case.” Op. at 8 (quoting and distinguishing In re West Delta Oil Co., 432 F.3d 347 (5th Cir. 2005)). It reviewed counsel’s conduct during the bankruptcy case as well as prior representations of the debtors. Then, reminding of the “clear error” standard of review, the Court affirmed a sanction of partial disgorgement (20% of the fee) for the late disclosure. Op. at 15. The Court concluded with a thorough review of the standards for allowing pleading amendments and affirmed the denial of leave for the trustee to add new claims. Op. at 15-16.
In Shcolnik v. Rapid Settlements, bankruptcy creditors had obtained a $50,000 arbitration award of attorneys fees against the debtor, and appealed a summary judgment that the award was dischargeable. No. 10-20800 (Feb. 8, 2012). The Fifth Circuit reversed, finding an issue of fact as to whether the fee award arose from “willful and malicious injury by the debtor” in pursuing meritless claims, and was thus nondischargeable. Op. at 5-6 (citing 11 U.S.C. § 523(a)(6)). (The debtor’s threats included a “massive series of legal attacks . . . which will likely leave you disbarred, broke, professionally disgraced, and rotting in a prison cell.” A thoughtful dissent questioned whether the majority’s ruling would deter legitimate litigation demands, and whether the Court was inserting itself into matters resolved by the arbitrator. Op. at 9.
In the case of In re Dell, Inc., the Court reviewed the settlement of a shareholder class action against the arguments of two objectors. No. 10-50688 (Feb. 7, 2012). The Court first held that a class member does not have to file a proof of claim to have standing to object. Op. at 5. The Court then reviewed and rejected several objections to the fairnes of the settlement, reminding that a full evidentiary hearing is not necessarily required at a fairness hearing. Op. at 10. Finally, the Court found no abuse of discretion in awarding an 18% fee to the attorneys ($7.2 million) instead of requiring a “lodestar” calculation, rejecting a strict reading of In re High Sulfur Content Gasoline Prods. Liab. Litig., 517 F.3d 220, 228 (5th Cir. 2008) (which stated: “This circuit requires district courts to use the ‘lodestar method’ to ‘assess attorneys’ fees in class action suits.”).
The case of Garriott v. NCsoft presented a challenge to a $28 million judgment for breach of an employee’s stock option contract. After resolving a liability issue under South Korean law about the employee’s termination, the Court considered whether the judgment impermissibly considered post-breach stock appreciation. The Court faulted the defendant for not raising its challenge to the damages calculation in a Daubert motion, evidence objection, or charge objection, and rejected the argument under “plain error” review. Op. at 7-9 (“Displeased with the jury’s decision, NCSoft now asks for a mulligan.”) The Court also found sufficient direct evidence, consistent with the expert models, as to when the employee would have sold his shares. Op. at 9 (reminding that damages “may be too speculative if based on ‘assumptions without basis in the real world,'” but that the plaintiff “need not prove damages with mathematical certainty”).
Countrywide Home Loans sought to recover certain post-petition attorneys fees in a Chapter 13 bankruptcy case in Countrywide v. Velazquez. The Court reviewed the provisions of the relevant Deed of Trust, and concluded that the word “and” in the phrase “do and pay for whatever is reasonable or appropriate to protect Lender’s interest in the Property and rights under this Security Instrument” did not require that a recoverable fee involve both the protection of the lender’s interest and the lien. (Op. at 6-9 (citing Lanier v. Spring Cypress Investments, 1995 WL 489427 (Tex. App.–Houston [1st Dist.] Aug. 17, 1995, no writ)). The Court “respectfully disagree[d]” with the unpublished affirmance of a different result by another panel earlier this year in Wells Fargo v. Collins.
In Wal-Mart Stores, Inc. v. Qore, Inc. (originally released in July, revised October 6), Wal-Mart sued several defendants about structural problems with a new store in Starkville, Mississippi. Wal-Mart won some claims at trial, the share of which for defendant Qore (a geotechnical services firm) was $48,600. Pursuant to an indenmity provision that reached “any claim, demand, loss, damage or injury (including Attorney’s fees) caused by any negligent act or omission,” the trial court awarded $810,000 in fees against Qore – the substantial majority of Wal-Mart’s fees for the whole case. The Fifth Circuit agreed that this provision justified a fee award, but found the award excessive because Wal-Mart’s fees could have been segregated, and remanded for further proceedings. Op. at 6. The Court noted that Cobb v. Miller, 818 F.2d 1227 (5th Cir. 1987), an attorneys fee dispute in a civil rights case, raised policy issues about “private attorney[s] general” that did not apply to this Mississippi state law matter. Op. at 13.