Attorney's Fees Research Articles

Cartels As Rational Business Strategy: New Data Demonstrates that Crime Pays

This article is the first to analyze whether cartel sanctions are optimal. The conventional wisdom is that the current level of sanctions is adequate or excessive. The article demonstrates, however, that the combined level of current United States cartel sanctions is only 9% to 21% as large as it should be to protect potential victims of cartelization optimally. Consequently, the average level of United States anti-cartel sanctions should be approximately quintupled. The United States imposes a diverse arsenal of sanctions against collusion: criminal fines and restitution payments for the firms involved and prison, house arrest and fines for the corporate officials involved. Both direct and indirect victims can sue for mandatory treble damages and attorney's fees. This multiplicity of sanctions has helped give rise to the strongly held - but until now never seriously examined - conventional wisdom in the antitrust field that these sanctions are not just adequate to deter collusion, but that they are excessive. We analyze this issue using the standard optimal deterrence approach. This model is predicated upon the belief that corporations and individuals contemplating illegal collusion will be deterred only if expected rewards are less than expected costs, adjusted by the probability the illegal activity will be detected and sanctioned. To undertake this analysis we first calculate the expected rewards from cartelization using a new and unique database containing 75 cartel cases. We survey the literature to ascertain the probability cartels are detected and the probability detected cartels are sanctioned. We calculate the size of the sanctions involved for each case in our sample. These include corporate fines, individual fines, payouts in private damage actions, and the equivalent value (or disvalue) of imprisonment or house arrest for the individuals convicted. Our analysis shows that, overall, United States' cartel sanctions are only 9% to 21% as large as they should be to protect potential victims of cartelization optimally. This means that, despite the existing sanctions, collusion remains a rational business strategy. Cartelization is a crime that on average pays. In fact, it pays very well. Accordingly, our concluding section suggests specific ways cartel sanctions should be increased to become more nearly optimal. This should save consumers many billions of dollars each year.

Brief Amicus Curiae of Intellectual Property Professors in Support of Neither Party, No. 14-1513, Halo Elecs. Inc. v. Pulse Elecs. Inc.; No. 14-1520, Stryker Corp. v. Zimmer, Inc. (U.S. Supreme Court)

This amicus brief was filed on behalf of several intellectual property law professors in Halo v. Pulse and Stryker v. Zimmer regarding the appropriate standard for enhancing (increasing) damages under section 284 of the Patent Act, 35 U.S.C. § 284. It advances three primary arguments. First, it asserts that in light of the history of the statutory text and judicial precedent, willful infringement is the appropriate standard (and thus the only valid basis) for awarding enhanced damages under § 284 . Second, it contends that Federal Circuit’s two-part, objective/subjective test for determining willfulness articulated in In re Seagate Technology, LLC, 497 F.3d 1370 (Fed. Cir. 2007), is incorrect as a matter of law because this test is overly rigid and inflexible, particularly in light of the Supreme Court’s recent decision in Octane Fitness v. ICON Health & Fitness, Inc. 134 S. Ct. 1749 (2014), that rejected a similar test for attorney fee awards under § 284. Third, it argues that the Court should conclude the correct test for determining willfulness — and thus eligibility for enhanced damages — is that the infringer has at least recklessly violated the patentee’s rights under a totality of the circumstances.

Piling on? An Empirical Study of Parallel Derivative Suits

Using a sample of all companies named as defendants in securities class actions between July 1, 2005 and December 31, 2008, we study parallel suits relying on state corporate law arising out of the same allegations as the securities class actions. Critics have suggested that parallel suits are duplicative and do not add value for shareholders but instead serve only to enrich plaintiffs’ attorneys. We test several ways that parallel suits may add value to a securities class action. Most parallel suits target cases involving obvious indicia of wrongdoing, indicating that parallel suits do not add value by devoting resources to cases for which a securities class action may not already provide sufficient deterrent value. We find that although some parallel suits are filed first, potentially providing value in identifying wrongdoing, most are filed after a securities class action (termed “piggyback” parallel suits). Although we do find that parallel suits, and in particular piggyback parallel suits, sometimes target individual officers not already named as defendants in the securities class action, this expansion of defendants is not positively correlated with an increase in settlement incidence, monetary recovery amounts, or attorney fees. Parallel suits sometimes result in settlements when the corresponding class action is dismissed; however, in almost all these instances the parallel suit settlements provides no monetary recovery for the investors. One possible way a parallel suit may add value is by imposing different forms of sanctions for wrongdoing. We find that piggyback parallel suits often result in non-monetary, corporate governance settlements, particularly for frequent filing plaintiffs’ attorneys. Corporate governance settlements correlate with significantly lower attorney hours and attorney fees for the plaintiffs’ attorneys. We conclude that such settlements do not represent the product of extensive work by attorneys but are instead used to justify fees in cases where there is no monetary recovery.

Legal Differences in State Non-Discrimination Laws and the Effect of Employment Protections for Gay Men

This paper studies the impact of legal differences in state-level employment nondiscrimination acts (ENDAs) for gay men on their labor market outcomes. I focus on what effect legal differences have on cohabiting gay men. Using a differences-in-differences approach, the results show that ENDAs increased the wages of gay men when enacted. When treating all laws as the same, ENDAs increase hourly wages by 3.4% and have no effect on employment. When we control for legal differences between laws, the wage increase of ENDAs is shown to be 5.7% in states with damages and not statistically significant in states without damages. ENDAs increase employment by 1.4% in states that do not allow plaintiffs to recoup attorney's fees. In states with the attorney's fees provision, employment declines by 2.7%. Caps on damages result in positive employment growth for gay men. There are significant differences in the effect of ENDAs across demographic groups and geographies.

Recovering Attorney Fees Under AAA Arbitration

Recent state cases have enforced the award of attorney fees to parties on the losing end of arbitration even when the parties retracted their initial requests for such fees.

Damages Versus Specific Performance: Lessons from Commercial Contracts

Specific performance is a central contractual remedy but, in Anglo‐American law, generally is subordinate to damages. Despite rich theoretical discussions of specific performance, little is known about parties' treatment of the remedy in their contracts. We study 2,347 contracts of public corporations to quantify the presence or absence of specific performance clauses in several types of contracts. Although a majority of contracts do not refer to specific performance, substantial variation exists in the rates of including specific performance clauses. High rates of specific performance use in the area of corporate combinations through merger (53.4 percent) or assets sales (45.1 percent), inclusion of specific performance in some contracts of every type, and much lower use of it in loan agreements suggest that treatment of specific performance in sophisticated corporate contracts is more complex than existing theories of contractual remedies allow. Theories should expressly account for contract type variation. We also present results on the associations among contractual acceptance of five default dispute resolution rules: specific performance clauses, arbitration clauses, jury trial waiver clauses, litigation forum clauses, and attorney fee clauses. Rejecting the default damages rule in favor of specific performance is associated with rejecting each of the four other dispute resolution clauses.

Patent Case Management Judicial Guide - Third Edition

This treatise updates and expands upon the second edition of the Patent Case Management Judicial Guide (2012). Since that time, patent litigation has continued to increase in complexity. This edition encompasses implementation of the America Invents Act (“AIA”), the emergence of review proceedings at the Patent Trial and Appeal Board (“PTAB”), the Supreme Court’s many recent patent decisions (patent eligibility, claim construction, claim indefiniteness, infringement analysis (rejecting “joint infringement”), the intent requirement for induced infringement liability (rejecting a defense of good faith belief of a patent’s invalidity), and attorney fees), and the Federal Circuit’s damages jurisprudence (including damage awards for standard essential patents (SEP) licensed pursuant to fair, reasonable, and nondiscriminatory (FRAND) terms. It also includes case management checklists, model case management orders, and other materials developed by district judges and advisory bodies for streamlining patent case management. Finally, this volume adds a chapter on patent litigation at the Court of Federal Claims.

First Amendment Limits on Government Holiday Displays

“No holiday season is complete . . . without one or more First Amendment challenges to public holiday displays.” While Santa, Rudolph, and Frosty typically appear at city hall without controversy, government holiday displays that include religious symbols—such as a Christian creche, a Jewish menorah, or a Muslim star and crescent—are more likely to attract legal scrutiny under the Establishment Clause of the First Amendment to the U.S. Constitution. For governments that sponsor holiday displays with religious symbols, the resulting litigation can be costly. If the court concludes that the challenged display violates the Constitution, the government must pay the plaintiff’s costs and attorney fees. And even longstanding displays can be challenged—mere tradition is not a defense.

Third Party Litigation Funding - A Signaling Model

Elwin Francis settled his personal injury case for $150,000 and walked away with $111 from the settlement. Yes, the lawyers got their one-third, but this is not a story about attorney malpractice. Mr. Francis’s limited recovery stems from his involvement with the new kid in town, third-party litigation funders. Several years before the case settled, Mr. Francis borrowed money from LawCash and Lawbuck$, two litigation funding companies, via non-recourse loans. The nature of the loans meant that he only had to repay them if his case was successful. The catch was the extremely high interest rate, much higher than rates charged by credit card companies. All told Mr. Francis borrowed $27,000, but with the high interest rates by the time the case had settled that amount due had swelled to $96,000. Out of the $150,000 settlement, LawCash and Lawbuck$ received a profit $69,000 in interest that amounted to 46 percent of the settlement, the repayment of the principle of the loans represented another 18 percent, the attorney fees and expenses took a little more than a third, and the plaintiff was left nothing except for the money that had been advanced to him by the funding companies. While this situation sounds like an extreme example, the loan arrangement is not unique, and is part of a larger trend of third party litigation funding that has been sweeping across America in recent years.

Overcoming Under-Compensation and Under-Deterrence in Intentional Tort Cases: Are Statutory Multiple Damages the Best Remedy?

This Article advocates that states' statutes make greater and more systematic use of multiple damages by extending them to a much broader range of intentional, wrongful conduct. Part II of this Article will explain why extra-compensatory relief is called for when tortious conduct is intentional or malicious. Part III will compare punitive damages, attorney fees, and treble or other multiple damages as possible sources of additional relief. Part IV will focus on multiple damages. The Article will examine the range of existing state statutes and discuss why and how those statutes might be extended to a broader range of wrongful behavior.

US Supreme Court relaxes standards for awarding attorney fees under 35 USC 285 in patent suits

US Supreme Court relaxes standards for awarding attorney fees under 35 USC 285 in patent suits

An attorney fee as a signal in pretrial negotiation

We consider the signaling role of attorney fees which have been usually assumed as exogenous in literature. We show that there exists an equilibrium in which the informed plaintiff uses both the attorney fee and the settlement demand as signals for his damage amount. If attorney service is not productive, this equilibrium yields higher social welfare than the equilibrium involving solely the settlement demand as a signal. If attorney service is productive, however, social welfare is lower in the former equilibrium. This has a policy implication that regulating attorney fees is socially desirable if the attorney service is productive.

Confronting the Peppercorn Settlement in Merger Litigation: An Empirical Analysis and a Proposal for Reform

Shareholder litigation challenging corporate mergers is ubiquitous, with the likelihood of a shareholder suit exceeding 90%. The value of this litigation, however, is questionable. The vast majority of merger cases settle for nothing more than supplemental disclosures in the merger proxy statement. The attorneys that bring these lawsuits are compensated for their efforts with a court-awarded fee. This leads critics to charge that merger litigation benefits only the lawyers who bring the claims, not the shareholders they represent. In response, defenders of merger litigation argue that the lawsuits serve a useful oversight function and that the improved disclosures that result are beneficial to shareholders.This Article offers a new approach to assessing the value of these claims by empirically testing the relationship between merger litigation and shareholder voting on the merger. If the supplemental disclosures produced by the settlement of merger litigation are valuable, they should affect shareholder voting behavior. Specifically, supplemental disclosures that are, in effect, “compelled” by settlement should produce new and unfavorable information about the merger and lead to a lower percentage of shares voted in favor of it. Applying this hypothesis to a hand-collected sample of 453 large public company mergers from 2005-2012, we find no such effect. We find no significant evidence that disclosure-only settlements affect shareholder voting.These findings warrant a reconsideration of Delaware merger law. Specifically, under current law, supplemental disclosures are viewed by courts as providing a substantial benefit to the shareholder class. In turn, this substantial benefit entitles the plaintiffs’ lawyers to an award of attorneys’ fees. Our evidence suggests that this legal analysis is misguided and that supplemental disclosures do not in fact constitute a substantial benefit. As a result, and in light of the substantial costs generated by public company merger litigation, we argue that courts should reject disclosure settlements as a basis for attorney fee awards.Our approach responds to critiques of merger litigation as excessive and frivolous by reducing the incentive for plaintiffs’ lawyers to bring weak cases, but it would have an additional benefit. Current practice drags state court judges into the task of indirectly promulgating disclosure standards in connection with the approval of fee awards. We argue, instead, for a more efficient specialization between state and federal courts in the regulation of mergers: public company merger disclosure should be policed by the federal securities laws while state corporate law focuses on substantive fairness.

The Effect of Judicial Expediency on Attorney Fees in Class Actions

A judge facing exogenous constraints on his pecuniary income has an incentive to reduce his workload to increase his private welfare. In the face of an increase in caseload, this incentive will induce judges to attempt to terminate some cases more rapidly. In class action cases, failing to grant an attorney's fee request will delay termination. This conflict is likely to lead judges to authorize higher fees as court congestion increases. Using two datasets of class action settlements, we show that attorney fees are significantly and positively related to the congestion level of the court hearing the case.

Funding the Cause: How Public Interest Law Organizations Fund Their Activities and Why It Matters for Social Change

Most of the work of public interest law organizations does not make money. How do these organizations survive, given the economic realities of law practice? Drawing on survey data from a national random sample of public interest law firms, we investigate how funding models vary across public interest organizations and how funding sources affect these organizations’ activities. We find funding structures have, over time, shifted away from foundation support toward government grants. Compared to other organizations, however, conservative organizations draw significantly less of their budget from federal and state grants, and significantly more of their budget from private contributions. Conservative organizations are significantly less likely than other organizations to rely on funding that prohibits engaging in class actions, receiving attorney's fees, or lobbying. Respondents reported that funding restrictions hamper their ability to negotiate favorable settlements, bring about systemic change, and represent vulnerable client communities. We close with a comparative institutional analysis of different funding models.

Private Enforcement of the Kansas Wage Payment Act

We are practitioners, and in our practice we meet with many prospective clients who have worked, for a wage, but have not been paid by their employers. Unfortunately, there is nothing we as private lawyers can do for a majority of these people. The problem is not that the law provides no relief. Kansas, in fact, has a set of statutes on the books that makes it illegal for employers to fail to pay their wage-earning employees and penalizes violators. These laws, known as the Kansas Wage Payment Act (KWPA or Act), however, are not adequately enforced. For this reason, we argue here, the law should incentivize private enforcement. The most effective means of doing so is to amend the KWPA to include an attorney fee shift that favors prevailing plaintiffs, i.e., prevailing employees. In the status quo, the KWPA provides for two mechanisms of enforcement. First, the state of Kansas, through the Kansas Department of Labor (KDOL), is authorized to investigate and adjudicate employee wage complaints administratively. Second, the KWPA provides a private cause action for individual employees who are aggrieved under the Act. Even together these enforcement mechanisms have proved unable to vindicate a substantial number of Kansas employees victimized by wage theft. The

The Class Action Code. A Model for Civil Law Countries

The author proposes the enactment of a Class Action Code in civil law countries. The proposed Model Code extensively regulates all aspects of modern class actions, including standing, adequacy, prerequisites, certification, notice, proof, settlement, judgment, res judicata, lis pendens, attorney fees, injunctive class actions, class action for damages, calculation of damages, distribution of the award, fund for group rights, defendant class actions, etc.The objective is to inspire the creation of the best possible code for class action suits, in light of the needs and peculiarities of civil law countries and the international experience with class actions. Although the proposal is focused primarily on civil-law countries, it may also prove useful to common law countries considering the adoption or improvement of class action rules.La versione italiana di questo articolo puo essere trovata in: http://ssrn.com/abstract=951889A versao em portugues deste artigo pode ser encontrada em: http://ssrn.com/abstract=947207La version francaise de ce document se trouvent a: http://ssrn.com/abstract=1406310La version en espanol de este articulo puede encontrarse en: http://ssrn.com/abstract=952455

Attorney Fees in a Loser Pays System

Attorney fees fund litigation yet little is known about fees in most cases. Fee data are rarely available in the United States or in English rule, loser pays, jurisdictions. This Article analyzes fee awards in Israel, which vests judges with discretion to award fees, with loser pays operating as a norm. The 2641 cases studied constitute nearly all cases terminated by judgment in district courts in 2005, 2006, 2011, and 2012. Given many fee denials, and fees when awarded being well below client payments to attorneys, the fee system could reasonably be characterized as being more American than English. Fees were awarded to prevailing parties in 72.8 percent of cases. Judges often exercised their discretion to protect losing litigants, especially individuals, from having to pay fees. In tort cases won by individuals against corporate defendants, corporations paid their own fees plus plaintiffs’ fees in 99 percent of the cases; corporate defendants that prevailed in such cases paid their own fees 48 percent of the time. Asymmetry between plaintiffs and defendants existed. In cases with fee awards, the mean and median fee paid to prevailing plaintiffs was 110,000 shekels (NIS) and 31,000 NIS, respectively; the mean and median fee paid to prevailing defendants was 49,000 NIS and 25,000 NIS, respectively. Plaintiffs prevailed in 54.8 of cases between individuals but received 90 percent of the fees. Expected award amounts varied by case category and party status. Fees were significantly correlated with damages recoveries in plaintiff victories and with time on the docket. In contract and property cases, but not in tort cases, fees declined as a percent of recovery as the recovery increased.

Ethical Issues for Defense Counsel in Employment Practices Liability Insurance Litigation

This article originally appeared in the January 2013 Employment Law Committee newsletter. I. Employment Practices Liability Insurance Overview Employment Practices Liability Insurance (EPLI) covers a broad range of discrimination and harassment claims including indemnity and coverage for the cost of defense. EPLI extends to the business itself as well as its officers and employees. Coverage is typically triggered by an administration charge, lawsuit, or simple demand letter. EPLI policies typically cover a wide array of employment claims including 1) wrongful termination, 2) discrimination, and 3) retaliation. Most EPLI policies also provide coverage for violations of the Family and Medical Leave Act and various forms of harassment. EPLI coverage normally defines damages as amounts in excess of the retention including settlements, judgments, prejudgment and post-judgment interest, attorney fees and costs, defense expenses, and back and front pay awards. EPLI policies almost always exclude coverage for workers compensation, ERISA, unemployment, COBRA, wage and hour, NLRB, and breach of contract. The policies also exclude fines, penalties, taxes, amounts due under an express employment contract, stock options and deferred compensation, and injunctive relief. Additional exclusions in EPLI policies exist for bodily injury and property damage and intentional wrongdoing. II. Common Ethical Issues that Arise from EPLI Insurance The insurer's notice of assignment of a new law firm to defend the insured invokes a myriad of ethical issues that have implications for the insured, the insured's day-to-day lawyers, the assigned panel counsel, and the insurance company. These issues cannot be fully analyzed in a short article. Rather, the purpose of this article is to identify some of the prominent and ethical issues involved in many EPLI cases. Some of these ethical issues include: 1) identifying the client; 2) determining who controls the selection of defense counsel; 3) analyzing whether a reservation of rights changes who controls the selection of counsel; 4) complying with litigation management guidelines; 5) determining who manages the litigation; and 6) analyzing who controls the decision to settle. A. Who is the Client? Every EPLI claim that triggers coverage will involve 3 players--the insurance company, the policyholder, and the defense attorney. This is referred to as the tripartite relationship. Additionally, there is often a fourth player when the policyholder has a regular outside law firm that advises it on day-to-day matters and sometimes serves as outside general counsel. Depending on the jurisdiction, defense counsel retained by the insurance company will have either one client (the insured) or two clients (both the insured and the insurer). The prevailing view in most jurisdictions is the in which the insured and the insurer are considered clients of the defense attorney. Under the Two-Client the primary client is the insured. A growing minority of jurisdictions follow the Theory, which provides that the insured is the attorney's only client. Many legal commentators note that the One-Client Theory is consistent with ethical rules that govern attorneys and require them to have undivided loyalty to their client. B. Who Controls the Assignment of Counsel? Most EPLI policies are duty to defend policies. Absent any significant coverage issues that might give rise to a conflict of interest between the insured and the insurer, the insurer may generally rely on the policy contract language providing it with the right to select defense counsel. (1) One issue that significantly alters the insurer's right to appoint counsel is when the insurer defends pursuant to a reservation of rights. C. The Reservation of Rights Dilemma It is fairly common for an employment complaint filed against an insured to state both covered and non-covered claims or to be written ambiguously so it is difficult to determine whether a particular EPLI policy exclusion applies. …

Setting the Edges: Defending Against Plaintiff End Runs Around CAFA

This article originally appeared in the January 2013 Business Litigation Committee newsletter. In most any sport, the hometown favorite enjoys an ,edge over the visiting team invited to compete in hostile territory. But, in the bloodsport known as class action litigation, this home turf advantage often assures plaintiffs' attorneys will exploit state procedural rules to land blows against defendants in the form of unreasonable discovery orders, ex parte certification of classes, and massive settlements. The Class Action Fairness Act of 2005 (CAFA) promised to level the playing field in large class actions by broadening federal jurisdiction. But plaintiffs' attorneys have managed to evade CAFA and keep large class actions that affect the national economy in state courts where procedural rules provide fewer protections to defendants than federal courts, (1) thereby enabling plaintiffs to force defendants to settle often meritless claims for millions of dollars. Like a skilled running back on a toss sweep, plaintiffs have successfully run around federal jurisdiction in many class actions by purporting to limit the amount that they will seek on behalf of putative classes to less than the federal jurisdictional minimum. With its recent grant of certiorari in Standard Fire Insurance Co. v. Knowles, (2) the Supreme Court is now poised to end these efforts that undermine CAFA. I. Hostile Environment: The Playing Field Pre-CAFA Congress enacted CAFA to correct a jurisdictional anomaly that prevented removal of large class actions from state jurisdictions whose laws offer fewer protections to defendants and unnamed members of putative classes than the federal forum. Congress found that despite their effect on the national economy and the massive sums involved, class actions were generally adjudicated in state courts, where the governing rules are applied inconsistently (frequently in a manner that contravenes basic fairness and due process considerations). (3) Plaintiffs' attorneys became infamous for seeking drive-by certifications whereby ex parte certification orders were issued on the same day or shortly after the filing of the class action complaint. (4) Often defendants were simultaneously served with the class action complaint and the class certification order. Not surprisingly, class action filings became concentrated in a few plaintiff-friendly venues. For example, over a two-year period, one Alabama state court certified 35 class actions while all federal district courts combined certified only 38 class actions. (5) In Madison County, Illinois, plaintiffs' attorneys filed over 100 class actions in 2003 alone. (6) Plaintiffs' attorneys ran up the score against defendants. As one example, a small group of plaintiffs' attorneys obtained settlements worth between $3.39 and $3.83 billion, and received over $420 million in fees from those settlements, in nineteen class actions filed in Arkansas state courts soon before the enactment of CAFA. (7) These settlement values say nothing about the strength of the claims asserted; because the exposure in class actions is often sufficient to bankrupt defendants, defendants were faced with an unenviable choice after certification: settle meritless claims for large sums or risk trial. (8) Plaintiffs' attorneys also forced defendants to spend millions of dollars in complying with massive discovery requests. (9) A defendant in an Arkansas class action, for instance, estimated that compliance with a discovery request that it ultimately had to satisfy would cost $45 million. (10) Nor would class members necessarily benefit from large class action settlements, as individual class members were often left with a release of their claims in exchange for a tiny share of a settlement that may have had little value after accounting for attorney fees and costs. (11) Plaintiffs' attorneys kept large class actions out of federal court because complete diversity of citizenship was often lacking or no individual plaintiff had a claim worth more than $75,000. …