Whistleblower Digest
ATTORNEYS' FEES
[Last Updated Mar. 5, 2015]
FEDERAL COURT DECISIONS
ALLOCATION OF ATTORNEYS' FEES; JOINT AND SEVERAL LIABILITY
In Jones v. Southpeak Interactive Corp. of Delaware , No. 13-2399 (4th Cir. Jan. 26, 2015) (2015 WL 309626; 2015 U.S. App. LEXIS 1114), the Defendants objected to the district court's joint-and-several allocation of attorneys' fees among the defendants. The 4th Circuit found that the district court had not abused its discretion, noting that the district court enjoys considerable latitude in deciding how it will allocate attorneys' fees. The court noted that the7th Circuit and the DC Circuit have identified several situations in which it may be appropriate to hold all defendants jointly and severally liable for attorneys' fees, and that a defendant's ability to pay the award may be relevant. In the instant case, the Defendants requested that the Court of Appeals redistribute the fee award in proportion to each appellant's share of the damages awarded. The court denied the request, writing:
We have never required a defendant's share of a fee award to equal his share of damages, nor have other circuits. See, e.g., Corder v. Gates , 947 F.2d 374, 383 (9th Cir. 1991) ("We have never mandated apportionment based on each defendant's relative liability under a jury's verdict."). Such a requirement would take away the discretionary power that district courts have traditionally enjoyed in this area.
Slip op. at 41.
SOX FEE SHIFTING PROVISION DOES NOT BAR A PREVAILING DEFENDANT FROM RECOVERING ATTORNEY FEES UNDER A STATE WHISTLEBLOWER STATUTE
In Smith v. Psychiatric Solutions, Inc. , No. 13-12785 (11th Cir. May 6, 2014) (2014 WL 1775875), the Plaintiff-Appellant had brought a retaliatory discharge action against it former employer and its parent companies (the Defendant-Appellees) under the SOX whistleblower provision and a Florida whistleblower law. The district court dismissed both claims at summary judgment, and the 11th Circuit affirmed. The instant appeal concerned a fee dispute. After the district court granted summary judgment, the Defendants moved for attorney's fees under the Florida law, and the Plaintiff filed motions for Section 1927 sanctions and FRCP 11 sanctions. The district court, adopting a magistrate's report and recommendations, directed the Plaintiff to pay the Defendants $53,925.98 in attorney's fees, and directed the Plaintiff's attorney to pay the Defendants $5,338.20 in attorney's fees in connection with the Plaintiff's failed Rule 11 motion. On appeal, the 11th Circuit noted that the SOX does not authorize a court to award fees to a prevailing defendant, while the Florida law does. The court found that the SOX's statutory silence was not an implicit prohibition against awarding attorneys fees to employer: "Sarbanes-Oxley's fee provision requires courts to award fees to prevailing plaintiffs; it does not bar a defendant from recovering attorneys' fees that are authorized elsewhere." Slip op. at 6-7 (citations omitted). The court also found that the Florida law did not interfere with SOX's regulatory scheme, noting that fee awards under the Florida law are discretionary, "so judges need not award prevailing defendants fees if they determine doing so might deter employees from bringing meritorious actions in the future. Further, aggrieved employees can themselves eliminate the risk they may be held liable for a prevailing defendant-employer's attorneys' fees by foregoing an FWA claim and alleging on a Sarbanes-Oxley claim." Slip op. at 10-11. The court found that the district court's award was free from legal error and was within the district court's discretion. The court also found that the district court's Rule 11 sanctions award was within its discretion, and that the district court did not abuse its discretion in denying the Plaintiff leave to pursue fees under 28 U.S.C. 1927.
ATTORNEY FEES AND COSTS; HOURLY RATE; REASONABLE HOURS EXPENDED; ADJUSTMENT TO LODESTAR; DEDUCTIONS AND REDUCTIONS FOR UNEXPLAINED AND UNDOCUMENTED EXPENSES
In Wallis v. BNSF Railway Co. , No. 13-40 (W.D. Wash. Apr. 23, 2014) (2014 WL 16848472) (case below 2011-FRS-37), a jury found that the Defendants violated the whistleblower provision of the FRSA in regard to a 30-day suspension and to imposition of "risk-identifier/PPI points." The jury awarded $20,000 in damages. The Plaintiff then sought attorney fees and costs totaling $515,297.54. The court awarded $247,907.91 in attorney fees and expenses, and $30,459.82 in expert witness fees.
Reasonable hourly rates; local rate where not shown that local counsel was unavailable or unable to handle the matter; $600 per hour not supportable for Seattle area
The court applied the "lodestar" method for assessing the amount of reasonable attorney fees, and the 9th Circuit's Johnson-Kerr factors for determining whether to adjust the lodestar figure. See Hohlbein v. Utah Land Res. LLC , 467 Fed. Appx. 715, 716 (9th Cir. 2012). Because the Plaintiff had not shown that local counsel was unavailable or unable to handle the matter, the court found that the relevant community for determining the reasonable hourly rate was its own district. The Plaintiff's attorney had extensive experience and recognition in the field of railroad litigation, and requested an hourly rate of $600. The Plaintiff, however, presented no evidence on the rates from the court's judicial district. The Defendant presented affidavits opining that $400 was the appropriate rate in the district. The court adopted the $400 rate. The Plaintiff's local counsel asked for $500 per hour, but presented no evidence in support of the requested rate. The court awarded $325 per hour, which was the negotiated rate the local counsel charged the lead counsel. The court indicated that an attorney with the local counsel's experience might command a higher rate in other circumstances; but here he had only served as second-chair at the trial. The court awarded $275 and $250 an hour for attorneys with less experience. A $100 an hour rate for a paralegal was not challenged.
Reasonable hours; duplicate work by attorney and paralegal; fact that local counsel was not required to attend trial did not mean that his participation was unnecessary; deduction for defense on summary judgment where defense had limited success; no deduction for work on punitive damages claim where, although not successful, the claim went to the jury
The court made a number of deductions to hours claimed. The court made deductions for duplicate entries for an attorney and a paralegal for reviewing the same email, attending the same teleconferences and depositions, and drafting the same documents. The court allowed the duplicate hours for the attorney and the paralegal to both attend the trial.
The Defendant sought to exclude time for local counsel spent after a pre-hearing conference where the court told local counsel that he did not need to attend the trial. The court stated that its comment that local counsel did not need to attend the trial as local counsel did not preclude him from attending the trial as second-chair and serving an active role in the case. The court found that nature and complexity of the trial made the presence of two attorneys reasonably necessary, noting that the Defendant was represented by two attorneys.
The court made a deduction of 50% for defense of a summary judgment motion given the Plaintiff's limited success on that defense. On six unfavorable actions challenged by the Defendant, three were dismissed on summary judgment, one was dismissed at trial, and one was never presented to the jury. A claim for interference with medical treatment was dismissed. Thus, the Plaintiff had only been successful on one challenged action.
The court declined to make a reduction for time spend on a claim for punitive dates. Although unsuccessful, the court noted that there had been sufficient evidence to go to the jury on the issue.
The court reduced by 50% hours claims for travel time.
Adjustment of lodestar; no adjustment for limited success where plaintiff successful on claims that did go to the jury
The court recognized that a downward adjustment of a fee award may be considered where the plaintiff has limited success on pleaded claims. In the instant case, although many of the pleaded unfavorable personnel actions did not go the jury, the Plaintiff prevailed on the two unfavorable actions that went to the jury. The court therefore found that a reduction of the lodestar based on limited success was not warranted.
Costs and expenses; deductions for unexplained and undocumented expenses; reduction for excessive claimed meal expenses
The court noted that the FRSA does not define "litigation costs" and that no court had interpreted the phrase. The court concluded that "[w]here a statute authorizes an award of attorney's fees to a prevailing party, the Court may include reimbursement for out-of-pocket expense, such as travel, courier and copying costs." In the instant case, the court noted that the Plaintiff's method of presenting costs had made it difficult for the court to determine which expenses were reasonable and necessary. The court disallowed a claim for $9,077.95 in miscellaneous expenses where the request contained no explanation or documentation. The court allowed an unopposed claim for UPS/FedEx fees. In regard to travel, the court found that the Plaintiff's decision to hire national counsel was reasonable, and that it would award reasonable and necessary travel expenses as part of the attorney fee award. The court, however, found that the request failed to offer any explanation or justification for any of the trips taken by any of the travelers. The court allowed travel expenses for a deposition, a pretrial conference and the trial itself, but disallowed all of the remaining unexplained travel expenses. The court made a further reduction for the claimed meal expenses, reducing the amount to the court's per diem rate of $71 per day.
Expert witness fees; reduction for insufficient documentation
The court noted that the FRSA specifically allows a prevailing employee to recover expert witness fees. The court made a 25% reduction in the requested amount, however, due to insufficient documentation.
DEFENDANT'S REQUEST FOR ATTORNEYS' FEES AS SANCTION; SANCTION FOR FILING THE CLAIM NOT WARRANTED WHERE THERE WAS NO EVIDENCE THAT THE CLAIM WAS BROUGHT IN BAD FAITH; SANCTION FOR OPPOSING SUMMARY JUDGMENT MOTION NOT WARRANTED WHERE THERE WAS NO INDICATION THAT THE OPPOSITION WAS UNREASONABLE OR VEXATIOUS AS REQUIRED FOR 28 U.S.C. 1927 SANCTIONS OR IN BAD FAITH AS REQUIRED FOR SANCTIONS BASED ON COURT'S INHERENT AUTHORITY
In Boyd v. Accuray, Inc. , No. 11-CV-01644-LHK, 2012 WL 4936591 (N.D.Cal. Oct. 17, 2012) case below ALJ No. 2012-SOX-18), after the court granted the Defendant's motion for summary judgment against the Plaintiff, finding that the Plaintiff's claims arising from termination of his employment were insufficient as a matter of law under several theories, including the whistleblower provision of the Sarbanes-Oxley Act ("SOX"), 18 U.S.C. § 1514A, the Defendant moved for a grant of attorneys' fees. The Defendant's motion was based on several theories, one of which was that that the Plaintiff's lack of sufficient evidence on two elements of his SOX claim warranted sanctions pursuant to 28 U.S.C. § 1927 and the court's inherent authority.
The court noted that it was unclear whether the Defendant's motion was based on a sanction for bringing the claim to begin with, or for opposing summary judgment. As regards the former, the court ruled that section 1927 does not apply to initial pleadings, and therefore it could not be the basis for sanctions for filing the SOX claim. Thus, the only available source is the court's inherent power, and there was no evidence that the claim was brought in bad faith.
In regard to the opposition to the summary judgment motion regarding the SOX claim, the court found no indication that the opposition was "unreasonable" or "vexatious," as required for § 1927 sanctions, or in bad faith, as required for inherent power sanctions. The court stated that "the grant of summary judgment establishes only that Plaintiff had not marshaled enough evidence to support his claim - not that the claim was so lacking in merit as to be frivolous." The court therefore denied the Defendant's request for sanctions on the Plaintiff's SOX claim.
ATTORNEY FEES, COSTS AND PREJUDGMENT INTEREST
In Van Asdale v. Int'l Game Technology , No. 3:04-CV-00703-RAM, 2011 WL 2118637 (D. Nev. May 24, 2011), the District Court of Nevada awarded the plaintiffs' attorneys fees and costs based on the traditional "lodestar" calculations set forth in Hensley v. Eckerhart , 461 U.S. 424, 422 (1983) and made adjustments based on an evaluation of factors articulated in Kerr v. Screen Extra Guild, Inc. , 526 F.2d 67, 70 (9th Cir. 1975). The plaintiffs' requested a total of $1,237,956 in attorney's fees, which the defendant objected to on several grounds. The court noted that while the mandatory language in 18 U.S.C. § 1514A(c)(2)(C) may deprive the court of discretion on the propriety of awarding fees to the prevailing party, the amount awarded is clearly within the court's discretion because of the statute's use of the term "reasonable." See e.g. Twin City Sportservice, Inc. v. Charles O. Finley & Co., Inc ., 676 F.2d 1291, 1312-1313 (9th Cir. 1982). As the Supreme Court specifically noted, the standards set forth in Henley are generally applicable in all cases in which Congress authorized an award of fees to a "prevailing party."
The court rejected the defendant's reliance on the plaintiffs' settlement demands in its "results obtained" analysis because courts generally refrain from referencing proposed settlement agreements in light of the Federal Rule of Evidence 408, which seeks to protect the confidentiality of settlement negotiations. While the court found that the plaintiffs' successful SOX claims and their unsuccessful state claims were clearly related, the court found that the plaintiffs achieved a level of success such that using the hours reasonably expended as the basis for calculating a fee award was appropriate.
The court concluded that although the plaintiff's only prevailed on the SOX claim, the plaintiffs achieved excellent results and should recover a fully compensatory fee. The court noted that this action involved protracted litigation for a period of more than six years, and there could be no question that the result was significant. Although the defendant considers the verdict in excess of $2 million to be small in comparison with the amount the plaintiffs' requested a trial, in the court's experience, they obtained an excellent result.
ATTORNEY'S FEES AND COSTS; PLAINTIFF AS A PREVAILING PARTY WHERE HE ACCEPTED A RULE 68 OFFER OF JUDGMENT
In Grissom v. The Mills Corp. , No. 07-1777 (4th Cir. Dec. 3, 2008), the Defendant had made a Rule 68 offer of judgment prior to trial, which the Plaintiff accepted. The offer of judgment specifically did not cover any attorney fees and costs. The same day that judgment was entered in favor of the Plaintiff based on the Rule 68 offer, the Plaintiff filed a petition for an award of attorney fees and costs with respect to the SOX whistleblower aspect of his claim. The district court awarded fees and costs totaling over $325,000, after making as 25% reduction. On appeal, the Defendant argued that the Plaintiff was not entitled to any attorneys' fees and costs because he was not a prevailing party under SOX's fee-shifting provision, 18 U.S.C. § 1514A(c)(1).
The court first found that although the SOX provision did not use the legal term of art "prevailing party," its reference to entitlement to fees and costs for "[a]n employee prevailing" made applicable the "prevailing party" jurisprudence. The court then looked to Supreme Court authority to evaluate whether the Plaintiff was a prevailing party with respect to his SOX whistleblower claim, and found that he was. The Rule 68 judgment "created a material alteration of the legal relationship between Plaintiff and Defendant by imposing upon Defendant a legally enforceable obligation to pay Plaintiff $130,000.00." Slip op. at 9 (citation omitted). Moreover, there was judicial imprimatur on this change in relationship because the district court had the power to compel satisfaction of the judgment.
The Defendant also made alternative arguments that the $130,000 judgment was de minimis in comparison of the Plaintiff's far higher pretrial settlement demands, and that the district court should not have awarded any fees because the Plaintiff had misappropriated company documents in anticipation of litigation. The court, however, found no abuse of discretion by the district court in deciding to award attorney's fees and costs to the Plaintiff as a prevailing party on the SOX whistleblower claim.
The court remanded, however, for the district court to recalculate the attorney fees award, finding that the Plaintiff's prevailing-hourly rate evidence had been inadequate, and that the Laffey Matrix had been insufficient to carry the Plaintiff's burden of proof. The court also found that the Defendant had raised sufficient questions about the reasonableness of the number of hours expended on the case to warrant further explanation by the district court.
ADMINISTRATIVE REVIEW BOARD DECISIONS
ATTORNEY'S FEES MAY BE AWARDED FOR TIME ASSOCIATED WITH AN UNSUCCESSFUL SETTLEMENT NEGOTIATION
In Gunther v. Deltek, Inc. , ARB Nos. 13-068, -069, ALJ No. 2010-SOX-49 (ARB Nov. 26, 2014), the ALJ erred in denying attorney's fees for time associated with unsuccessfully negotiating a settlement of the Complainants' SOX claim. The ARB wrote:
"[S]ettlement discussions are an ordinary part of the litigation process. Thus . . . awarding attorney's fees incurred as a result of reasonable settlement efforts is proper." Couch v. Continental Cas. Co. , 2008 WL 131198, at *5, 2008 U.S. Dist. LEXIS 2327, at *12 (E.D. Ky. Jan. 11, 2008). "[F]ailed settlement negotiations . . . do not warrant a reduction of hours" awarded in attorney's fees. Trainer v. HEI Hospitality, LLC , 2012 WL 119597, *10 (D. Mass Jan. 13, 2012). See also Riverside v. Rivera , 477 U.S. 561, 569 (1986) ("[W]here a plaintiff has obtained excellent results, his attorney should recover a fully compensatory fee.").
USDOL/OALJ Reporter at 4.
ATTORNEY FEE PETITION; ARB SUMMARILY APPROVES UNOPPOSED PETITION
ATTORNEY FEE PETITION; PETITION FOR WORK BEFORE OSHA AND ALJ SHOULD BE FILED WITH THE ALJ RATHER THAN THE ARB
In Tablas v. Dunkin Donuts Mid-Atlantic , ARB Nos. 11-050, 13-091, ALJ No. 2010-STA-24 (ARB May 30, 2014), the ARB summarily approved the Complainant's unopposed petition for attorney's fees for proceedings before the ARB. The ARB noted that requested fees for work before the ALJ and OSHA were for the ALJ to determine, citing 29 C.F.R. § 1978.109(d)(1).
ATTORNEY'S FEES; APPLICATION OF LAFFEY MATRIX TO CASE TRIED IN SAN FRANCISCO; FEE AWARD IS NOT LIMITED TO AMOUNT COMPLAINANT ACTUALLY PAID HIS ATTORNEYS
In Barrett v. e-Smart Technologies, Inc. , ARB Nos. 11-088, 12-013, ALJ No. 2010-SOX-31 (ARB Apr. 25, 2013), the ARB affirmed the ALJ's use of the Laffey Matrix in calculating the attorney fee rate for the San Francisco market. On appeal, the Respondent argued that the attorney fee award was erroneous on several grounds, including that the Ninth Circuit had criticized the use of the Laffey Matrix in California because the matrix is based on rates in D.C., and because the award should have been based on the amount the Complainant actually paid in fees. The ARB found that the ALJ's fee award was supported and reasonable. The ARB noted the Complainant's argument that the San Francisco market has a 35% premium as compared with a 24% premium for the D.C. market on which the Laffey Matrix is based. The ARB also stated: "We reject e-Smart's claim that fees should match costs or the rates actually billed to the clients. To the contrary, the hourly rate is determined by reference "to the prevailing market rates in the relevant community." Blum v. Stenson , 465 U.S. 886, 895 (1984) (rejecting an argument that attorney's fees for nonprofit legal service organizations should be based on cost); Missouri v. Jenkins by Agyei, 491 U.S. 274, 286 (1989)." USDOL/OALJ Reporter at 10.
ADMINISTRATIVE LAW JUDGE DECISIONS
ATTORNEY'S FEES; RATES BASED ON GEOGRAPHIC MARKET FOR LOCATION OF HEARING
In Hagman v. Washington Mutual Bank, Inc. , 2005-SOX-73 (ALJ Dec. 19, 2006), the Complainant had retained a law firm from New York, although the case was ultimately heard in Southern California. The Complainant submitted a fee petition seeking hourly rates of $450 to $475 for the senior attorney, $300 to $325 for an associate attorney, and $75 for a paralegal. In support, counsel supplied rates for New York lawyers published in the New York Law Journal in December 2005, and the 2006 Altman Weil Survey of Law Firm Economics . The Respondent raised numerous objections. The ALJ observed that the relevant geographic market for purposes of determining the appropriate hourly rate for attorney's fees is normally the locality of the hearing, although some specialized cases may be grounds for an exception. The ALJ, however, found no special circumstances in the instant SOX case, and found that Los Angeles was the relevant market, that based on the ALJ's knowledge and experience with the California bar that the Complainant could have found qualified local attorneys, and that there was no evidence that the Complainant's attorneys were 'specialists' in SOX whistleblower cases. The ALJ acknowledged that the case before him involved novel and complex issues. The ALJ observed that no lawyer appearing before him had ever received more than $300 per hour in a litigated non-settlement context, and weighing all factors found the appropriate rates to be $350, $275 and $75 respectively.
ATTORNEY FEES; SETTING MARKET RATE; USE OF ALTMAN WEIL SURVEY; FACTORS WEIGHED
In Platone v. Atlantic Coast Airlines Holdings, Inc. , 2003-SOX-27 (ALJ July 13, 2004), the Complainant's attorney did not present any evidence on the prevailing market rate for the type of complex litigation done before the ALJ other than to state what the attorney's own fees are for such work. The ALJ, therefore, consulted the 2004 Altman Weil Survey of Law Firm Economics for guidance. Taking into account that information, the lead attorney's experience, the complexity of the issues presented, and the excellent presentation at trial, the ALJ found that the hourly rates agreed to by the Complainant were well within the market rate and eminently reasonable. The ALJ took into account counsels' agreement to represent the Complainant at reduced rates to provide her with access to the legal system, but also found that the fee petition, which showed substantial time devoted to research and preparation for depositions, did not reflect an "expert" status in this particular practice area.
ATTORNEY'S FEES; PERCENTAGE REDUCTION WHERE BLOCK BILLING DID NOT PROVIDE AN ADEQUATE MEANS TO ACCESS REASONABLENESS OF TIME EXPENDED
In Platone v. Atlantic Coast Airlines Holdings, Inc. , 2003-SOX-27 (ALJ July 13, 2004), the ALJ reduced the total hours billed by 15% where the Complainant's attorney used block billing that did not provide an adequate basis upon which to judge the reasonableness of all the time expended.
ATTORNEY'S FEES; USE OF MORE THAN ONE ATTORNEY
In Platone v. Atlantic Coast Airlines Holdings, Inc. , 2003-SOX-27 (ALJ July 13, 2004), the Respondent argued that the fee petition should be disallowed where it did not indicate the distinct contribution of the Complainant's two attorneys, and where entries were allegedly duplicative and redundant. The ALJ, however, found that the petition reflected her own observations at trial -- that one attorney paid a lead role and the other a support role -- which is an efficient and cost-effective approach to litigation. The ALJ also noted that the Respondent had used two attorneys at depositions and at trial. Thus, with the exception of a few specific instances, the ALJ declined to disallow any time on the ground that the Complainant unnecessarily used the services of more than one attorney.
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