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Finding “pervasive shortcomings” in its billing entries, the U.S. District Court for the District of Massachusetts recently slashed a law firm’s fee request by seventy percent. In Covidien LP and Covidien Holding Inc. v. Brady Esch, C.A. No. 16-12410-NMG (D. Mass. April 17, 2020) Covidien’s counsel sought $2.7 million dollars for representing Covidien in an employment contract dispute. Criticizing the firm for block billing, excessive hours and unwarranted and duplicative fees, the District Court Judge slashed the fees sought to $798,500.
In the case, Covidien sued its former Director of Global Strategic Marketing for breach of confidentiality, breach of obligation to disclose “inventions” and breach of the covenant of good faith and fair dealing. After a nine-day trial, the jury returned a verdict for Covidien on its breach of confidentiality claims but found for the defendant on the other two claims. The Court entered judgment in favor of Covidien in the amount of $794,892.24, and allowed its request for costs, attorneys’ fees and expenses. Pursuant to the Court’s order, Covidien was entitled to pre- and post-judgment interest at 12% annual rate, reasonable attorneys’ fees and costs as the prevailing party. Covidien moved to alter or amend that judgment to include calculation of interest, fees and costs. The defendant opposed the motion and cross-moved to strike evidence submitted by Covidien, or in the alternative to amend judgment, reduce damages or order a new trial on some issues.
Covidien sought attorneys’ fees in the amount of $2,661,774.35, which Covidien claimed reflected the true value of the necessary work of a “limited core group of attorneys and paralegals.” The Court disagreed finding the request to be excessive. First, approximately $50,000 of the requested fees related to separate litigation pending in Delaware and California – those were not recoverable in this action. Second, more than half of the time entries billed by Covidien’s attorneys reflected a significant pattern of block billing in increments of one hour or more. The Court found the block billing represented “such a pervasive shortcoming”, it warranted an “across-the-board” global 25% reduction of all fees. Third, the Court found the billing records reflected overstaffing of both local and out of town attorneys, duplicative entries, inefficient use of junior attorneys, vague work descriptions and unreasonable hourly rates of support staff. Applying the “bedrock principle” adopted in the First Circuit that an award of attorneys’ fees should reflect the prevailing parties’ degree of success the Court further reduced the fees awarded. Although Covidien was the prevailing party for purposes of awarding costs, it attained only a part of what it sought in instituting the litigation. Thus, the Court reduced Covidien’s fees award by half of the already discounted request.
Lastly, the Court recognized that Covidien’s sought attorneys’ fees in the amount of over $2.6 million were “nowhere near commensurate with the damages awarded by the jury, warranting a further substantial reduction” Killeen v. Westban Hotel Venture, LP, 872 N.E.2d 731, 738 (Mass. App. Ct. 2007). Accordingly, the Court reduced Covidien’s fees request by an overall 70% and awarded it $798,500 in legal fees, less than a third of what Covidien originally requested.
Covidien also asked for $531,008.76 in costs. The Court found that despite yielded mixed results, Covidien reasonably “carried the day” and was entitled to costs, but the request was cut in half to exclude the costs Covidien unreasonably and unnecessarily expended on travel and lodging for out-of-state attorneys, as well as on copying and printing its own deposition transcripts. Then the Court reduced the costs by 50% to account for Covidien’s partial success.
Most jurisdictions employ the loadstar method to calculate reasonable attorneys’ fees. The method begins with the calculation of total hours worked, which is derived from authenticated billing records, reduced by any hours that are duplicative, unproductive or excessive. The total hours worked is then multiplied by a reasonable hourly rate. To determine a reasonable hourly rate, Courts consider such factors as prevailing rates in the community, the qualifications, experience and specialized competence of the attorneys involved and the “quantum of success achieved in the litigation.” Coutin v. Young & Rubicam Puerto Rico, Inc., 124 F.3d 331, 338–39 (1st Cir. 1997).
Covidien’s attorneys learned a hard lesson. First and foremost invoices must be carefully reviewed to ensure time is charged to the correct client and it is not excessive or duplicative. While litigation is costly, it does not justify the expenditure of attorneys’ fees, which are more than triple the amount recovered in a jury award. If you have any questions or would like more information, please contact our Lawyers Professional Liability Practice Group, a list of which can be found at www.fmglaw.com.