Pennsylvania Court of Appeals completely denies $900K fee award for being grossly excessive

Posted on March 26th, 2019 by Legal Fee Advisors

By Kathleen Ramirez.

In Clemens v. New York Central Mutual Fire Insurance Company, a recent case in the Court of Appeals, the Court affirmed the Pennsylvania District Court’s decision to deny a fee award. The Court of Appeals ruled that the District Court did not abuse its discretion when it denied an insured’s request for attorneys’ fees against his insurance company. The District Court had found several unethical billing practices within the billing records and had concluded that 87% of the bills were unreasonable. Though the insured was entitled to be reimbursed for the value of 13% of the bills requested, the Court of Appeals held that the District Court had properly exercised its discretion in completely denying the fee request, affirming the District Court’s ruling that the request was “grossly excessive.”

Initially, the insured had brought a claim against his insurance company to recover uninsured motorist benefits under his insurance policy and he had also asserted a bad faith claim under Pennsylvania’s Bad Faith Statute. The insured’s claim to recover benefits eventually settled. As for the bad faith claim, the jury awarded a verdict in favor of the insured. After the verdict was entered, the insured, as the prevailing party, petitioned for over $900,000 in attorneys’ fees. The District Court denied the insured’s motion for fees and the insured appealed. After performing a lodestar analysis, the Court of Appeals affirmed and completely denied the request in its entirety as it found that the insured’s counsel did not keep contemporaneous time sheets, had provided vague descriptions, billed unreasonable/excessive hours, and did not bill at reasonable hourly rates.

The Court found that counsel for the insured did not maintain contemporaneous time records throughout the litigation. In fact, counsel attempted to recreate all the records for trial. The recreation of the billing records was tasked to one attorney who ultimately estimated the length of time she and her colleagues spent on individual tasks. Although the recreated records alone did not warrant a reduction, the Court did apply a heightened scrutiny when reviewing the records.

Furthermore, the Court found that the billing entries were entirely too vague. The Court had trouble discerning whether the hours billed were reasonable. The records included numerous entries that read “Other,” “Communicate,” “Communicate-Other,” “Attorney Review,” “Analysis/Strategy.” None of the entries further explained the subject matter of the task billed.

Aside from vague entries, the Court found that a total of 626 hours billed were unnecessary and excessive. While billing for trial preparation, counsel had billed 64 hours for “Transcripts/clips” and 562 hours for “Trial Prep.” Though unsure of the meaning of “Transcripts/clips,” the Court completely deducted the 64 hours billed as it found it was excessive to spend 64 hours on such a task. The Court also deducted time spent on “File Management;” time spent on file management at times exceeded 7 hours a day. The descriptions provided for purely clerical tasks and the Court reasoned it warranted a full reduction. Regarding the remaining 562 hours billed by counsel, the Court also reasoned those hours were excessive and applied a complete reduction. The Court considered the 562 hours on trial prep outrageous as the trial itself was only four days long and counsel seemed alarmingly unprepared at trial, with the Court noting “that counsel’s (supposedly) hard work did not appear to pay off at trial.”

Last, the Court found that counsel did not meet their burden of showing that the requested hourly rates were reasonable. Throughout the case there were five billing attorneys; only one of which testified at the hearing regarding the fee petition. The remaining four, however, did not submit affidavits identifying their usual billing rates or describing their expertise. Without such information, the Court was unable to determine whether the requested hourly rate was reasonable. Given the lack of information, the Court used its discretion and decided to reduce all hours billed prior to the arrival of the testifying attorney, hours billed for multiple attorney round tables, and trial hours billed by more than one attorney.

This case highlights the importance of maintaining detailed billing records. Had the attorneys kept contemporaneous bills as well as detailed entries, the Court may not have found the tasks to be clerical or vague. Detailed descriptions may have saved the insured’s counsel from a complete award denial. Though at the end of the case the insured was entitled to thirteen percent of the fees requested, given all the billing deficiencies found, the Court deemed the entire award “outrageously excessive” and thus, awarded no fees at all.

Clemens v. New York Cent. Mut. Fire Ins. Co., 903 F.3d 396 (3d Cir. 2018)

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