• January 22, 2016
Hartwell Dam, Floodgates Open, photo by Lynne Jenkins

Hartwell Dam, Floodgates Open, photo by Lynne Jenkins

Update (January 22, 2016): In the original post, below, I questioned when it is appropriate to impose a defendant’s legal fees on a losing plaintiff. And when should a plaintiff win its attorneys’ fees from a multi-year battle against a defendant (absent a statute or contract allowing for fee-shifting)?

U.S. District Court Judge Susan R. Nelson (D. Minn.) tackled this “flip-side” question this week in the Great Lakes Gas v. Essar Steel litigation thatI have followed for years.

Plaintiff highlights four instances of Defendants’ sanctionable conduct [purportedly warranting fee-shifting]: (1) filing motions with no factual or legal support; (2) repeatedly asserting that Defendants did not breach the Contract and presenting legal arguments to support that assertion, even after the Court definitively ruled Defendants had breached the Contract; (3) creating unreasonable discovery delays and driving up costs in the process; and (4) Defendants’ conduct (more specifically, the conduct of their counsel) in support of its expert witness and challenging that expert’s exclusion by the Court. In addition, Plaintiff asks for another $853,000 in attorney’s fees ‘for three particularly egregious instances of misconduct.’ These are: (1) Defendants’ ‘baseless and unsupported’ third-party claims against Great Lakes’ parent entities resulting in voluminous discovery; (2) the fact that Defendants ‘attempted to undermine this Court’s jurisdiction by filing a complaint with FERC’ asserting the same issues as were the pending before the Court; and (3) Defendants’ challenge to the Court’s subject matter jurisdiction shortly before trial and in violation of a stipulation between the parties. Based on these instances and Defendants’ overall allegedly dilatory and vexatious conduct, Plaintiff requests a total sanction award of over $2.6 million in attorney’s fees.

Judge Nelson found:

Plaintiff’s recounting of Defendants’ objectionable conduct is largely accurate. As previously described, the Court does not agree with, nor condone, this conduct. However, an award of sanctions for millions of dollars in attorney’s fees, requires especially egregious and vexatious behavior. Even looking at the totality of Defendants’ conduct over the last several years, this Court cannot conclude that sanctions are presently appropriate.

So, no monetary punishment for the laundry list of costly tactics. But, maybe the decision reflects a reputational punishment? Note that Judge Nelson calls out the Plaintiff’s lawyers, specifically (” Defendants’ conduct (more specifically, the conduct of their counsel)…”

“Plaintiff’s objections to Defendants’ repeated mischaracterizations of the record and case law are largely well-founded….Unfortunately, there are also a number of examples of Defendants’ mischaracterizations of the record and refusal to accept the rulings and findings of this Court….” These are not findings that I would appreciate being associated with my legal practice or my law firm.

The day after Judge Nelson’s denial of the request for award of attorneys’ fees, Plaintiff filed its notice of appeal…

Original post (January 18, 2016): I have represented some clients defending against lawsuits that had no merit. It is sad and it is maddening. I am firmly convinced that the opposing lawyers in these cases KNEW their lawsuits have no merit. But they also know how the system works. They knew how it could be worked to their clients’ advantages, to extract money from an entirely innocent defendant.

If only we had some fail-safe method to identify these cases (rather than the “firm conviction” of a biased advocate), if we could identify such cases with scientific precision, we could easily devise a system to thump litigants and their lawyers who pursue frivolous cases. We could sharply reduce the punishing inefficiencies that these lawsuits impose on our system and on innocent people and businesses.

But, unfortunately, our justice system cannot easily or reliably differentiate among (1) the shameless extortionists; (2) the unforgivably stupid; (3) the merely mistaken; and (4) the unlucky.

That being said, how should a Court respond to defendants’ indignant demands for legal fees after a resounding victory, like the one that Defendant Heimerl & Lammers, LLC just had against Plaintiffs Mountain Marketing Group, LLC, and John A. Krueger d/b/a Krueger Law Firm? Well known Minneapolis trial lawyer, Ashwin Madia, notched a resounding win for Heimerl & Lammers in a trademark lawsuit over personal injury telephone numbers (1-800-INJURED vs. 612-INJURED). By the time the case went to the jury, Plaintiff requested $1.00 in “nominal damages” (after having made a $1,000,000 settlement demand two weeks before trial). The jury deliberated for only two hours (two minutes more than Plaintiffs’ counsels’ closing argument) and rejected even awarding one dollar.

As far as I know, and perhaps unfortunately, the law does not give clear authority for apportionment of such fees based on the merit (or lack thereof) of the case brought.  A court cannot say, “The defendant incurred $403,426 in legal fees and costs defending this case. The case was a loser. I am not sure whether plaintiff (or plaintiff’s counsel) fall into the categories of ‘shameless extortionists’ or ‘stupid’ but I am confident that their misfortune cannot be attributed to ‘mere mistake’ or ‘bad luck.’ Accordingly, I will thump plaintiff (or plaintiff’s counsel) with X% of Defendants’ fees — that is enough to hurt but not to destroy them.”

So the issue is “all or nothing.” (Notably, our courts can and very often do have such discretion when a plaintiff’s lawyer wins a case, as Mr. Madia learned firsthand when his requested fee award for a case he won for a plaintiff was reduced from a requested $50,000 to $17,000.)

As I see it, restricted to “all or nothing,” the easier answer for courts in almost every case is: nothing.  As every U.S. civil litigator knows, our courts normally follow “the American Rule,” by which civil litigants, as a general rule, bear their own attorneys’ fees and costs, with very limited exceptions (by statute or court rule). The rationale is “floodgate calibration.” We do not want to deter meritorious legal claims (particularly by the poor or otherwise oppressed or disadvantaged among us) by increasing the risk of not only losing but being financially destroyed by bringing a lawsuit.

So imposing the obligation of paying the other side’s fees for one’s loser of a case is extremely rare. We’ll see if Mr. Madia’s latest trial victory results in such an outlier…. (Does the Court’s recent denial of a motion to postpone the appeal time for the judgment until after the motion for attorneys’ fees is ruled upon signal an inclination?)

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