SEPTEMBER 2018 BAD FAITH CASES: OUTRAGEOUSLY EXCESSIVE FEE PETITION RESULTS IN DENIAL OF ALL FEES; 10 FACTORS TO CONSIDER IN EVALUATING A FEE PETITION (Third Circuit, Pennsylvania Bad Faith Statute)

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In this unusual case, the trial court entirely denied a successful bad faith plaintiff attorney’s fees petition, and the Third Circuit affirmed.

On appeal, the Third Circuit summarized the trial court opinion: “As the prevailing party under the Bad Faith Statute, [the insured] then submitted a petition for attorney’s fees, in which he requested an award of $946,526.43 in fees and costs. The District Court denied this request in its entirety, however.

In a thorough and well-reasoned one-hundred-page opinion, the court reviewed every time entry submitted, performed a traditional lodestar analysis, and concluded that eighty-seven percent of the hours billed had to be disallowed as vague, duplicative, unnecessary, or inadequately supported by documentary evidence. In light of that substantial reduction, the District Court deemed [the] request ‘outrageously excessive’ and exercised its discretion to award no fee whatsoever.”

The Third Circuit affirmed, and made clear that under circumstances of “outrageously excessive” fee demands, a trial court has discretion to award no fees at all, even though some fees were obviously incurred. The court stated:

“The District Court denied this petition in its entirety, reasoning that it was not adequately supported and that the requested amount was grossly excessive given the nature of the case. Finding no abuse of discretion, we will affirm and, in doing so, take the opportunity to formally endorse a view already adopted by several other circuits—that is, where a fee-shifting statute provides a court discretion to award attorney’s fees, such discretion includes the ability to deny a fee request altogether when, under the circumstances, the amount requested is ‘outrageously excessive.’”

The opinion gives some guidance on how to properly petition for attorney’s fees:

  1. Maintain contemporaneous time records. Even if not required, this is the best practice.

  2. It is best not to reconstruct time records. This is not forbidden, but will call for higher scrutiny in evaluating the fee petition.

  3. It is best not have one attorney reconstruct time records for another attorney, especially where the other attorney is no longer with the firm and cannot be consulted.

  4. Time entries should not be so vague that the amount of time needed to complete the task cannot be evaluated from the time entry. As the court states, the time entries must “be specific enough to allow the district court to determine if the hours claimed are unreasonable for the work performed.”

  5. Time spent must not be unnecessary or excessive.

  6. Purely clerical matters should not be billed at attorney rates.

  7. Trial preparation time should not be disproportionate to the time actually spent at trial.

  8. Do not seek to recover fees that never would have been billed to the client. (“Hours that would not generally be billed to one’s own client are not properly billed to an adversary.”)

  9. At trial, be prepared and know the applicable rules of court, especially when considerable time is billed for trial preparation.

  10. The billing attorneys themselves must put on evidence, by affidavit or testimony, of the reasonableness of their hourly rates.

In sum, “district courts have the discretion to deny a fee request in its entirety when the requested amount is ‘outrageously excessive’ under the circumstances.” “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.’”

“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.’”

Date of Decision: September 12, 2018

Clemens v. New York Central Mutual Fire Insurance Company, U. S. Court of Appeals for the Third Circuit No. 17-3150, 2018 U.S. App. LEXIS 25803 (3d Cir. Sept. 12, 2018) (Bibas, Greenaway, Restrepo, JJ.)

 

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