Law Firm Voluntarily Reduces Fees by 8%, Texas Court Takes an Extra 45% Reduction

Posted on July 13th, 2017 by Legal Fee Advisors

By Jillian Robbins.

Plaintiff production company sued Defendant Yahoo for breach of an agreement relating to a promotional event for the 2014 NCAA Men’s Basketball Tournament. When Defendant prevailed on its summary judgment motion, but lost on various counterclaims, it sought $2,418,687.40 in attorneys’ fees and costs. In making the application for fees and costs, the Defendant’s law firm voluntarily reduced their fees by 8%, but because of lack of billing judgment, block billing and vagueness of time entries, and failure to segregate the successful from the unsuccessful claims, the Northern District of Texas reduced the fees sought by an additional 45%, awarding only $913,961.23.

First, the Court reduced the fees sought by 15% for failure to segregate the successful claims’ fees from the unsuccessful claims. The Court determined that Yahoo did not meet its burden of showing that it would have done the same work had it not brought its unsuccessful counterclaims. The Court explained that this is a very strict standard that requires more than “just pointing out a common set of facts,” and Defendant did not meet this burden by simply showing that the claims arose out of the same set of operative facts–they were not “so intertwined” as to make segregation impossible.

Next, in calculating the fee using the lodestar method, the Court reduced some of the attorneys’ hourly rates because they were unreasonable when compared with the market rates for the Dallas area. Thus, when the Defendant sought $351-$504 per hour for certain associates and $774 and $931.50 per hour for two partners, the Court reduced this to $270-$370 per hour for these associates and $500 per hour for each partner, as is typical for the Dallas area for similar matters. This reduction was made in spite of the fact that some of the attorneys involved in the case were located in New York.

In calculating the number of reasonable hours, the Court first determined that the Defendant’s law firm did not demonstrate proper billing judgment, thus an extra 10% reduction was warranted. The Court explained that even though Defendant’s law firm voluntarily reduced their fees by 8%, the law firm did not point to specific invoice entries that were removed, and because of heavy redactions it was impossible for the Court to determine if it was an appropriate reduction. The Court also reduced the fees by an additional 20% because of block billing, heavy redactions, and vagueness in the billing invoices. The Court explained that the descriptions were unclear and generally vague, so the reduction was warranted. The Court additionally denied Defendant’s request for travel and witness expenses as under Texas Law, such expenses are not taxable.

This case should serve as a reminder that although firms may exercise some good faith in reducing their fees sought, if it is unclear from the billing records what exactly was removed, courts will sometimes still reduce the fees sought. Additionally, when moving for attorney’s fees, firms should focus solely on the fees associated with successful claims and exclude unsuccessful ones, as courts are likely to only take into consideration fees and costs associated with the successful claim when calculating a lodestar fee.

Note: an appeal has been filed as of March 1, 2017. We will keep you updated on any advances in this matter!

SCA Promotions, Inc. v. Yahoo! Inc., No. 3:14-CV-957-O, 2016 WL 8223206 (N.D. Tex. Nov. 21, 2016), report and recommendation adopted, No. 3:14-CV-00957-O, 2017 WL 514545 (N.D. Tex. Feb. 8, 2017).

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