Minnesota Court Refuses to Charge National Rates, Slashing Fee Award by 52%

Posted on January 30th, 2018 by Legal Fee Advisors

By Zachary Kalmbach.

A court’s refusal to charge national billing rates in an attorneys’ fees dispute drastically reduced a fee award in 2017. Safelite v. Rothman, a Minnesota federal court case, arose out of enforcement and regulatory actions taken by the Minnesota Department of Commerce (DOC) concerning plaintiff Safelite. In April 2015, Safelite sued the Commissioner of the DOC for alleged violations of the First and Fourteenth Amendments and the Dormant Commerce Clause. The parties resolved plaintiffs’ due process claims and Safelite sought summary judgment on its remaining claims. The Court granted the motion in part. Safelite retained three firms in the litigation, one local and two from out of state, and requested $1,912,551.06 in attorneys’ fees and $54,321.21 in costs. The Court reduced the total award by 52%, in large part because it capped hourly rates at the vastly lower rates of the local firm.

The Court began its discussion by applying a 15% reduction to “adequately address the work performed on non-prevailing claims and also properly acknowledge Safelite’s success.” The Court explained that Safelite’s prevailed on only one of two First Amendment claims and found that the successful and unsuccessful claims were largely unrelated.

The Court then discussed hourly rates. In determining reasonable hourly rates to use in a lodestar analysis, courts typically look to market rates, which are the ordinary rates for similar work in the community in which the case is litigated. Even though the two out-of-state firms billed at rates consistent with rates they generally charged nationally, the Court held that a reasonable fee “typically involves reference to the local” billing rates, and therefore capped the fees at the highest billing rates of the local firm. The Court found that the out-of-state firms billed $820 more per hour than the local firms for work performed by partners, and $475 more per hour for work performed by same-level associates. The Court concluded that “[t]his disparity [was] simply too great, with an insufficiently strong basis for adhering to out-of-state counsels’ rates, to constitute a reasonable billing rate.” Substituting the local firm’s highest rates for those of the out-of-state firms yielded a total of $1,074,029 in attorneys’ fees.

As to the reasonableness of the number of hours billed, the Court found a problem with staffing at a preliminary injunction hearing, with the hearing staffed by three partners from one of the out-of-state firms. While the Court “appreciate[d] the need for staffing at both the partner and associate level, the importance of coordination between national and local counsel, and the unique insights that individual attorneys bring to litigation, staffing by more than one national counsel partner at a given event is not reasonable here.” As the overstaffing was limited to one hearing, however, the Court only applied a small overall reduction of 5% to the total attorneys’ fees. The Court also reduced expenses by $4,910.74 to account for two of the partners’ travel to the hearing, resulting in a total expense award of $49,410.47.

The Court also reduced $47,535.00 in fees sought for a paralegal’s work by 40% because the paralegal charged for clerical work such as downloading documents and preparing “key case binder[s].” Although some of the paralegal’s work was compensable, much of the compensable work was block-billed and described in the same billing entries as clerical work. This block-billing made it difficult for the Court to distinguish compensable from non-compensable work, resulting in the 40% reduction.

The Court’s reductions resulted in a total fee award $941,534.67 plus expenses, a 52% reduction from the amount requested. This case shows that, where there is a great disparity between national and local billing rates, a court may be disposed to cap rates at the lower market rates. Multiplying the lower market rates by the reduced number of hours, as required by the lodestar analysis, can lead to significantly reduced fee awards. Moreover, future challengers of attorneys’ fees may look to this case as an example of what constitutes overstaffing as well as non-compensable clerical work.

Please note, Safelite appealed the decision in September 2017. We will update you on any news regarding the appeal!

Safelite Grp., Inc. v. Rothman, No. CV 15-1878 (SRN/KMM), 2017 WL 3495768 (D. Minn. Aug. 11, 2017)

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