Tuesday, April 16, 2013

Calculating Bankster-Paid Legal Fees For Non-Profit Law Firm Taking "Undesirable" Consumer Law Case Alleging Unconscionable Conduct When Originating, Servicing Home Loan; Judge Grants Add'l 20% Contingency Fee Bonus

In Charleston, West Virginia, The West Virginia Record reports:

  • Mountain State Justice, the nonprofit law firm that helps low-income individuals, will recover only 69 percent of what it was requesting for helping a Beckley woman sue Wells Fargo.

    U.S. District Judge Thomas Johnston ruled March 29 that Mountain State Justice is entitled to $24,784.32 in attorneys fees and $3,349.60 in costs and expenses incurred during Ann Koontz’s lawsuit against Wells Fargo. He cited hourly rates that were too high and vague timesheets.

    Koontz accused Wells Fargo of engaging in unconscionable conduct concerning the origination and servicing of her home mortgage loan.(1)

    Using a lodestar analysis, Johnston determined Mountain State Justice was entitled to $20,653.60 for its work, but he increased the amount by 20 percent.(2) Wells Fargo did not disagree.

    “In light of (a March decision by the state Supreme Court),(3) the particular facts of this case and the absence of any opposition by Defendant, the court is inclined to agree that the lodestar analysis in this case does not adequately measure the true market value of Plaintiff’s uniquely situated counsel,” Johnston wrote.

    In the March decision by the Supreme Court, a Harrison County woman was awarded $32,000 after being foreclosed on. A $30,000 award of attorneys fees to Mountain State Justice was affirmed in the decision.(4)

    Harrison County Circuit Court Judge Thomas A. Bedell had ruled that Mountain State Justice survives on fees collected in “undesirable” cases.

    In Koontz’s case, she alleged Wells Fargo told her that her mortgage payment would be $614, but her closing was rushed and hurried without a sufficient explanation of the loan documents and loan terms. At closing, she says she was told her payment would be more than $700 per month.

    “Ms. Koontz continued with the loan closing because it was too late to back out,” the complaint says. By 2008, the payment had increased to $980, she says.

    On Feb. 28, 2012, the case was dismissed after Koontz and Wells Fargo reached a settlement. However, three months later, Koontz filed a motion to re-open the case.

    The two sides had reached an agreement on everything except the amount of attorneys fees. Mountain State Justice sought $40,484.60 as compensation for the work of attorneys Jennifer Wagner, Sara Bird and Dan Hedges.

    That figure represented hourly rates of $275 for Wagner and Bird, $425 for Hedges and $100 for paralegal work.

    Wells Fargo argued the hourly rates were unreasonable and unsupported by evidence of area market rates and that billing records offered little detail of the work provided.

    In support of their requests, the three Mountain State Justice attorneys filed affidavits, but none of them include the names of the attorneys with whom they spoke about the going hourly rate for the services they provided.

    When Wells Fargo challenged their requests, they filed affidavits from peer attorneys John Poffenbarger, Benjamin Bailey, Anthony Majestro and David Grubb.

    Johnston said only Grubb specializes in consumer law and the other three affidavits were too brief. He also noted an identical statement – “I believe these rates are reasonable, and within the range of hourly rates charged for attorneys of their experience and background in this community” – within each of the four affidavits.

    Johnston said the affidavits were deficient for the following reasons:

    -Poffenbarger’s and Majestro’s affidavits contain no representations that they know the reputations, skills and training of the three attorneys;

    -Bailey’s affidavit “fails to characterize Mr. Hedges’ work one way or another”;

    -Grubb’s affidavit has statements attesting to the reputation and skill of only Hedges and not the other two; and

    -The affidavits do not provide evidence of “the prevailing market rates in the relevant community for the type of work” for which Plaintiff seeks an award.

    Wagner performed most of the work on the case, charging $30,085 for 109.4 hours. Hedges charged $5,100 for 12 hours.

    Johnston found that a reasonable hourly rate for Wagner is $160, noting her federal clerkship term, lectures on consumer law issues and some appellate experience. He added that she was a “very inexperienced” attorney at the time the case was filed.

    “In selecting this rate the Court also considered the fact that Plaintiff tendered an affidavit by Ms. Wagner, lead counsel in the case, that inexplicably fails to set forth fundamental, simple and essential facts: when she graduated from law school, the length of her clerkship term, and the type of legal practice prior to joining Mountain State Justice,” Johnston wrote.

    Hedges’ appropriate hourly rate, Johnston wrote, is $375. He called him a “preeminent consumer law attorney who has devoted his lengthy career to this highly specialized area of public interest law.”

    Johnston then wrote about deficiencies in Wagner’s timesheets. They failed to describe with any specificity the tasks she was performing, he said. Some of her entries simply said “legal research,” “revise,” “draft,” “discovery,” “email,” and “preparation.”

    “Ms. Wagner’s time entries became somewhat more detailed as the case went on, presumably because she gained more experience as a lawyer,” he wrote.

    A 10 percent reduction of the hours billed remedied the vague entries, leaving Wagner’s amount of hours she could charge for at 98.46.
Source: Judge slashes Mountain State Justice’s fees request.

For the ruling, see Koontz v. Wells Fargo, N.A., Civil Action No. 2:10-cv-00864 (S.D. W.V. March, 29, 2013).

(1) Quoting from the Federal court ruling:
  • This case, originally filed in state court and later removed to this Court, centered on allegations that Defendant Wells Fargo N.A. engaged in unconscionable conduct concerning the origination and servicing of Plaintiff Ann L. Koontz's home mortgage loan in violation of the West Virginia Consumer Credit Protection Act ("WVCCPA"), West Virginia Code §§ 46A-1-101, et seq. (1996) and common law.
(2) The 20 percent mark-up on top of the basic fee calculation awarded by U.S. District Judge Johnson was to account for a contingency fee multiplier or bonus to reflect, among other things, the "undesirability" of the case taken by the attorney (often, a non-profit, public interest law firm) in the context of fee-shifting statutes.

In awarding the fee enhancement, Judge Johnston indicates that said award is generally not the common practice in a federal court proceeding, but was influenced, in part, by West Virginia state court precedent to do so here.

Quoting from the ruling:
  • Under West Virginia law, a "contingency enhancement" (sometimes referred to as a multiplier), may be "used to enhance the `normal' hourly fee to compensate for the risk of loss." Comm. on Legal Ethics v. Triplett, 378 S.E.2d 82, 93 (W. Va. 1988).

    The West Virginia Supreme Court has recognized, however, that "[t]he great weight of authority is that the lodestar calculation is the general rule in awarding attorneys' fees with occasional contingency enhancement." Bishop Coal, 380 S.E.2d at 249 n.10; see also Heldreth, 637 S.E.2d at 366 n.11 (noting that in federal courts the use of a fee enhancement mechanism in conjunction with fee-shifting statutes has been expressly rejected citing City of Burlington v. Dague, 505 U.S. 557, 565-66 (1992)).
  • Importantly, the West Virginia Supreme Court of Appeals, as noted supra, recently approved of the trial court's consideration of the fact that the plaintiff was represented by Mountain State Justice and that Mountain State Justice was a "unique organization" that "survives based upon fees collected in `undesirable' cases such as [plaintiff's]." Vanderbilt, 2013 WL 870442, slip op. at *24. The West Virginia Supreme Court stated that this was a proper consideration under Aetna's "undesirability" factor. Id.

    In light of Vanderbilt, the particular facts of this case, and the absence of any opposition by Defendant, the Court in inclined to agree that the lodestar analysis in this case does not adequately measure the true market value of Plaintiff's uniquely situated counsel.

    Accordingly, the Court FINDS that a twenty percent enhancement to the lodestar figure of $20,653.60 is appropriate in this case and, thus, AWARDS $24,784.32 in attorneys' fees and $3,349.60 expenses to Plaintiff for a total award of $28,133.92.

    In making this determination, this Court was mindful of its duty to apply West Virginia law in its attorneys' fees reasonableness analysis to the extent that federal law conflicts with West Virginia law.

    In the face of the "strong presumptionunder federal law that the lodestar figure represents a reasonable fee, an enhancement based on the fact that Mountain State Justice's lawyers served as counsel may not have been applied but for consideration of West Virginia precedent and Defendant's failure to respond to this factor.

    Importantly, the Court's decision to apply this enhancement in this case should not signal that it will apply an enhancement in every case where Mountain State Justice's lawyers serve as counsel. Rather, the Court's decision to apply the enhancement was purely an exercise of its discretion under the particular facts of this case.
For more on the contingency fee bonus when calculating prevailing party legal fees, whether in pro bono cases or otherwise, see:

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