Who’s Acting In Bad Faith Now? Federal Court Slams Policyholder’s Counsel on Fee Petition

by Saul Ewing Arnstein & Lehr LLP
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Plaintiff Bernie Clemens was injured in a motor vehicle accident in August 2009. Clemens’ attorney helped him recover $25,000 in a supplementary underinsured motorist (SUM) claim, and then sued Clemens’ insurer under Pennsylvania’s bad faith insurance statute, 42 Pa. C.S.A. § 8371. After a five day trial, a jury awarded Clemens $100,000 in damages on the bad faith claim. Clemens’ attorney then filed a motion with the court seeking interest and attorney’s fees – in the astounding amount of $1,122,156.43.

In a blistering 100 page opinion (certainly worth the read if you have time for it), United States District Judge Malachy E. Mannion rejected all of Clemens’ claimed attorney’s fees, awarded only about $5,000 in interest, and referred the court’s concerns over Clemens’ counsel’s handling of the case to the Disciplinary Board of the Supreme Court of Pennsylvania. Judge Mannion analyzed every line item in the bills accompanying the fee petition, breaking the request out into sections for the SUM claim, the bad faith claim, and the preparation of the fee petition itself.

Among the myriad concerns addressed by the court, Judge Mannion noted that under Clemens’ contingent fee agreement, the most that his attorneys would have received as a fee was just under $50,000, which was in stark contrast to the seven-figure recovery sought in the fee petition. While counsel argued that it sought $9 million in settlement discussions prior to the bad faith trial, the court chastised counsel for such an unrealistic demand, noting that the defendant insurer had offered $75,000 (only $25,000 below the verdict) to settle prior to trial.

The court was also concerned that all of the billing records were developed after the jury verdict in the bad faith claim, although there was precedent for accepting reconstructed billing. While the court ultimately exercised its discretion to not award any attorney’s fees to Clemens, the court dissected the hours counsel allegedly put into the case and disallowed 87% of the overall hours claimed by counsel. For example, the court noted that Clemens’ counsel billed over 560 hours with the generic description of “trial prep,” often billing 20 to 22 hours per day for such work, which the court called out as “outrageous and abusively excessive” especially in light of “the underwhelming performance of counsel at trial.”

While the facts of this case are clearly out of the ordinary, the opinion provides an excellent framework for challenging a claim for attorney’s fees following an adverse verdict for the insurer.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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