The Defense Base Act (“DBA”) allows a claimant to shift liability for attorney’s fees to the employer and insurance carrier, if certain criteria are satisfied. In that context, sometimes fee disputes arise. In a fee dispute, the employer or insurance carrier argues that a claimant attorney’s hourly rate is excessive, or that certain time entries should not be paid.
For the most part, this post does not address hourly rates. Instead, this post addresses the amount of time billed for particular tasks…and a proposed way for the Office of Administrative Law Judges (“OALJ”) or the Office of Workers’ Compensation Programs (“OWCP”) to avoid lengthy and often contentious fee litigation. Those agencies could adopt a fee procedure similar to Local Rule 54.3 from the Northern District of Illinois.
How Local Rule 54.3 Helps:
Sometimes, the attorneys hired by DBA carriers make hypocritical objections to time entries on a claimant attorney’s fee petition. By “hypocritical,” I mean that the employer complains about the time it took the claimant’s attorney to perform a certain task, yet as it turns out the employer’s attorneys charged the same amount of time or more.
Local Rule 54.3 cuts through the hypocritical arguments by requiring the employer’s attorneys to produce their time records, too. While fee litigation is not an exercise in parity, Local Rule 54.3 forces employer’s attorneys to propose an actual yardstick instead of simply crying foul. Plus, it reinforces ethical rules requiring candor to a tribunal. Local Rule 54.3 could provide a helpful guide for reducing fee litigation by requiring all parties to “put their cards on the table.”
Regulatory Procedure for Fee Disputes:
In a typical fee dispute, the successful claimant’s attorney files a fully supported fee petition–sometimes called an “application”–with the Administrative Law Judge (“ALJ”) or District Director assigned to the case. The fee petition includes an itemization of the time billed, invoices, receipts, and, where necessary, affidavits, declarations, and surveys. The fee petition must comply with any orders issued by the ALJ regarding submissions, as well as 20 C.F.R. § 702.132. Section 702.132 states, in pertinent part:
The [fee] application shall be supported by a complete statement of the extent and character of the necessary work done, described with particularity as to the professional status (e.g., attorney, paralegal, law clerk, or other person assisting an attorney) of each person performing such work, the normal billing rate for each such person, and the hours devoted by each such person to each category of work. Any fee approved shall be reasonably commensurate with the necessary work done and shall take into account the quality of the representation, the complexity of the legal issues involved, and the amount of benefits awarded . . . .
OALJ Procedure for Fee Disputes:
ALJs may control their own docket. Consequently, each ALJ may make their own rules for fee dispute procedures. Here is an example of one fee procedure–which you should keep in mind for the next section:
If Claimant seeks an award of attorney fees and costs pursuant to 33 U.S.C. § 928, an interim application conforming to the requirements of 20 C.F.R. § 702.132(a) shall be filed within 30 days of the date on which this Order [was issued]. Should Employer object to any fee or costs requested in the application, the parties shall discuss the matter and attempt to informally resolve any objections. Any agreement reached between the parties as a result of such discussions shall be filed in the form of a stipulation. If the parties cannot resolve all issues relating to the requested fees and costs, Employer’s objection shall be filed no later than 30 days following service of the fee application. Any objection must be accompanied by a certification that the parties made a good faith effort to resolve the issues before filing the objection.
For this particular ALJ, there is a four-part fee procedure:
- The Claimant’s attorney shall file a fee application within 30 days of the date of the Order;
- If Employer objects to any fees or costs, the parties shall discuss the matter and attempt to informally resolve any objections;
- If the parties reach an agreement regarding the objections during the informal resolution attempts, then the resolution shall be filed as a stipulation; and
- If all issues were not resolved, then the Employer shall file an objection “accompanied by a certification that the parties made a good faith effort to resolve the issues before filing the objection.”
As presented below, Local Rule 54.3 adds an additional (but crucial) step: production of defense attorney invoices.
Northern District of Illinois Local Rule 54.3:
The Northern District of Illinois’s Local Rule 54.3 requires transparency, which leads to fewer fee disputes. In the event the non-moving party challenges time entries on the moving party’s fee motion, the non-moving party must produce its attorney’s time entries for comparison.
Local Rule 54.3 provides the procedural framework for fee disputes:
(d) Pre-Motion Agreement. The parties involved shall confer and attempt in good faith to agree on the amount of fees or related nontaxable expenses that should be awarded prior to filing a fee motion.
During the attempt to agree, the parties shall, upon request, provide the following information to each other:
(1) The movant shall provide the respondent with the time and work records on which the motion will be based, and shall specify the hours for which compensation will and will not be sought. . . .
(2) The movant shall inform the respondent of the hourly rates that will be claimed for each lawyer, paralegal, or other person. . . . If the movant will rely on other evidence to establish appropriate hourly rates, such as evidence of rates charged by attorneys of comparable experience and qualifications or evidence of rates used in previous awards by courts or administrative agencies, the movant shall provide such other evidence.
(3) The movant shall furnish the evidence that will be used to support the related nontaxable expenses to be sought by the motion.
. . .
(5) If no agreement is reached after the above information has been furnished, the respondent shall . . . disclose the total amount of attorney’s fees paid by respondent (and all fees billed but unpaid at the time of the disclosure and all time as yet unbilled and expected to be billed thereafter) for the litigation and shall furnish the following additional information as to any matters (rates, hours, or related nontaxable expenses) that remain in dispute:
(A) the time and work records (if such records have been kept) of respondent’s counsel pertaining to the litigation, which records may be redacted to prevent disclosure of material protected by the attorney-client privilege or work product doctrine;
(B) evidence of the hourly rates for all billers paid by respondent during the litigation;
(C) evidence of the specific expenses incurred or billed in connection with the litigation, and the total amount of such expenses; and
(D) any evidence the respondent will use to oppose the requested hours, rates, or related nontaxable expenses.
. . .
(e) Joint Statement. If any matters remain in dispute after the above steps are taken, the parties, prior to the filing of the fee motion, shall prepare a joint statement listing the following:
(1) the total amount of fees and related nontaxable expenses claimed by the moving party . . . . ;
(2) the total amount of fees and/or related nontaxable expenses that the respondent deems should be awarded . . . . ;
(3) a brief description of each specific dispute remaining between the parties as to the fees or expenses; and
(4) a statement disclosing—
(A) whether the motion for fees and expenses will be based on a judgment or on a settlement of the underlying merits dispute, and
(B) if the motion will be based on a judgment, whether respondent has appealed or intends to appeal that judgment.
The parties shall cooperate to complete preparation of the joint statement no later than 70 days after the entry of the judgment or settlement agreement on which the motion for fees will be based, unless the court orders otherwise.
(f) Fee Motion. The movant shall attach the joint statement to the fee motion. Unless otherwise allowed by the court, the motion and any supporting or opposing memoranda shall limit their argument and supporting evidentiary matter to disputed issues.
See N.D. Ill. R. 54.3 (emphasis added).
A Reduction in Fee Litigation:
Northern District of Illinois’s Local Rule 54.3 has reduced fee litigation.
The rule serves two main goals. “First, a settlement-enhancing goal: the rule encourages the parties to resolve fee disputes without seeking court intervention, because a ‘request for attorneys’ fees should not result in a second major litigation.’” Shakman v. Cook Cnty. Clerk, No. 1:69-cv-02145, 2021 U.S. Dist. LEXIS 213530, at *17 (N.D. Ill. Nov. 4, 2021) (quoting Hensley v. Eckerhart, 461 U.S. 424, 437 (1983)). “Second, . . . the rule assists the court by helping to insure that, in the event a fee motion is filed, the parties have narrowed and crystalized their disputes, and have provided the court with the information it needs to make a reasoned ruling on the fee request.” Id. (internal quotations omitted).
Local Rule 54.3(d)(5) states that if the parties cannot reach an agreement about the amount of the claimant attorney’s fees, the defense counsel must disclose all of their attorney’s fees to the claimant’s attorney. The resulting transparency makes it more likely the parties will come to an agreement about the requested attorney’s fees.
Crystallizing disputes in DBA fee litigation means that the reviewing ALJ or District Director will have fewer time entries to consider. From a pragmatic standpoint, removing hypocritical objections means fewer individual task-oriented disputes. Fewer disputes means quicker resolution, shorter fee orders, and preservation of judicial resources. Fee litigation will not turn into a “second major litigation” if the fee litigation never starts or is significantly limited at the outset. Cf. Hensley, 461 U.S. at 437. Moreover, a rule or order requiring production of defense attorney invoices obviates discovery requests for those documents.
What the Judge or the District Director Will See:
So, what would an ALJ see if the defense attorneys provided their fee invoices over the life of a claim? And why would this proposal reduce and streamline legitimate fee disputes and, in so doing, conserve judicial resources?
First, the flimsiness of some defense attorney’s fee challenges would become immediately apparent to the ALJ. Insurance carriers pay 95% to 99% of the total of each defense firm invoice. The reductions are not performed by the assigned adjuster, but instead by a third party vendor. For example, a defense firm might submit an invoice for $17,280.51 and receive $16,724.61 (or 96.78% of the amount billed). That percent reduction becomes relevant when compared to the percent reduction demanded by defense attorneys in fee fight filings. Imagine a situation where the claimant’s attorney was entirely successful in litigating the claimant’s DBA claim. The defense attorneys may argue that the claimant attorney’s time should be reduced by 50% or more. The defense attorney’s argument appears disingenuous when they collected 95% to 99% of their own invoices despite their lack of success. After all, federal fee shifting statutes exist to attract competent counsel, not to run them off because of concerns that even successful litigation results in a loss of income.
Second, defense attorneys are paid quarterly. Whereas claimant attorneys must carry their expenses and time over the life of a claim, defense attorneys receive guaranteed payments as part of their contract with the insurance carrier. Expenses for experts, deposition transcripts, travel, etc., are reimbursed every three months. Meanwhile, claimant attorneys carry those costs for years–because that is how long a DBA claim lasts.
Third, insurance carriers do not require their attorneys to separate multiple emails sent in one day to one person. To use a real world example, a defense attorney may charge 0.7 hours for “Voluminous emails exchanged with [adjuster] and [annuity broker] discussing settlement authority, settlement negotiations, structured settlement and mediation,” without concern that the carrier will deduct those charges based on a “block billing” argument.
Fourth, report writing is time consuming…and therefore expensive. After a defense attorney takes one or more depositions, that attorney must provide a written report to the assigned adjuster. The “interim defense report” provides “recommendations to [the adjuster] to position claim” for reimbursement, litigation, continuance, requests, etc. Defense attorneys write many reports over the life of a claim, as is required by their contract with the insurance carrier.
Fifth, defense attorneys must immediately consider the possibility of War Hazards Compensation Act (“WHCA”) reimbursement. Indeed, the possibility for reimbursement must be identified in the defense attorney’s initial report–a lengthy write-up prepared within 30 days of receiving the file assignment. Because WHCA reimbursement is considered at the outset, the defense attorney is necessarily on notice that the Department of Labor’s Division of Federal Employees’, Longshore and Harbor Workers’ Compensation (“DFELHWC”) requires voluntary disclosure of their invoices for carrier to obtain WHCA reimbursement of those allocated fee expenses. See 20 C.F.R. § 61.104(b).
Sixth, defense attorneys charge anywhere from 1 to 2 hours per final page written for court submissions. Motions, responses, post-hearing briefs, etc., average out to roughly the same hour-per-page cost. Defense attorneys suggest that claimant attorneys should be limited to multiple pages per hour for the same pleadings. This argument is especially problematic because claimants have the burden of proof in DBA claims. It makes sense that a claimant’s attorney must spend time preparing the best case possible for the claimant. As some ALJs have recently noted, the DBA is an “unusual” forum, and claimants benefit from:
[R]epresentation by an American lawyer – one who presumably knows how Administrative Law Judges evaluate conflicting evidence in claims under the [DBA] . . . and one who, thanks to Section 28 of the Act, can devote sufficient time and effort to developing and presenting as complete a record as necessary, without taxing his or her client financially, with the assurance of fair compensation if the claim is successful.
See, e.g., Seruma v. Constellis Grp., 2020-LDA-00517 at 13 n.9 (OALJ Oct. 13, 2021).
Seventh, there are surprisingly few entries detailing discussions with the employer as opposed to discussions with the insurance adjuster. Why is this important? Because the employer is the represented party. The insurance carrier hired the attorney to represent the employer–the insured party. If the claimant serves discovery on the employer for information in the employer’s possession, custody, or control, then the employer must respond. It is inappropriate for the insurance adjuster to filter information to the defense attorney to answer discovery on behalf of the employer without the employer’s involvement. But that happens every day.
Eighth, hypocritical objections are real. Some examples I have seen include:
- Complaining that an attorney spent 30 minutes talking to a claimant who was wholly unfamiliar with the DBA, even though the defense attorney spent nearly two hours speaking with a claims adjuster about the same case.
- Bemoaning the 1.2 hours spent providing written explanations to the claimant, a DBA novice, even though the defense firm spent 10.1 hours sending reports to experienced claims adjusters.
- Moving for a reduction in the 13 hours spent responding to carrier’s fee objections, even though carrier spent a whopping 42 hours preparing those objections.
- Arguing that 0.1 hours was too long to draft and sign an LS form, even though the defense attorney spent 0.2 hours doing the very same task.
- Spending 34 hours researching and writing reports but complaining about 1.1 hours spent by the claimant’s attorney to discuss a legal issue with an injured worker.
This is not an exhaustive list.
What are “Fees for Fees,” and Who Profits From Fee Fights?
When an attorney must defend their fee petition, they may later seek “fees for fees.” Essentially, “fees for fees” means that an attorney may seek fees not just for the initial claim, but also for the fee fight that another party started. Courts hope the prospect of having to pay “fees for fees” will discourage protracted fee litigation.
For DBA claims, “fees for fees” should prompt pause and reflection. An insurance carrier must ask if it will spend more than it saves by fighting fees. If the dollar value of the fight is higher than the dollar value of the potential savings by engaging in the fight, then logic favors fee payment and no litigation. Moreover, the potential dollar value of a “fees for fees” award must be included within the cost of the fee fight. That means the carrier must ask whether the dollar value of the potential savings is worth more than the cost of the fight plus the cost of a potential “fees for fees” award. Indeed, the carrier needs to review the amount its attorney’s plan to charge for the fee fight.
Considering these costs, who profits from fee fights? Spoiler alert: the clear winner in DBA cases is defense counsel.
- The insured employer (which all DBA employers are) doesn’t win and in fact couldn’t care less about attorney fee litigation. After all, the employer already paid its insurance premiums, and the United States government reimbursed the employer for those premium costs. The fee fight adds no expense.
- The insurance carrier doesn’t win and actually has the most to lose in attorney fee disputes. Not only must the insurance carrier pay defense attorney fees for the fight, it must pay any award for claimant attorney’s fees, too. (This is mitigated, however, by the WHCA’s reimbursement of fees as allocated expenses.)
- The claimant’s attorney might see some profit–or at least the dollar value of the time spent engaging in the fee fight. That dollar value is not guaranteed, however; and claimant attorneys would rather get paid for their initial efforts than engage in a time-consuming fee fight.
- The defense attorney has the most profit to gain. Remember, the defense attorney’s fees are guaranteed. The insurance carrier pays between 95% and 99% of each invoice, including the dollar value of the time spent fighting about fees. Without a litigation-specific yardstick to quickly expose the defense counsel’s objections are unrealistic or meritless, the litigation goes on and on. And defense counsel continues being paid.
Do ALJs Have the Authority to Adopt N.D. Ill. 54.3?
There is sufficient latitude in the OALJ’s Rules of Practice and Procedure to allow an ALJ to adopt Northern District of Illinois’s Local Rule 54.3.
In the absence of a Longshore-specific regulation, the OALJ Rules govern practice before the OALJ. In the absence of a Longshore-specific regulation and an OALJ Rule, the Federal Rules of Civil Procedure apply. See 29 C.F.R. § 18.10(a).
Longshore regulations discuss what a claimant’s attorney must submit as part of their fee itemization. Nothing is said about appropriate procedures in fee fights.
Further, the OALJ Rules do not address attorney fee fights. In fact, the OALJ Rules rarely address attorney’s fees. The hourly rate and billable hours may be considered when assessing sanctions. See 29 C.F.R. § 18.35(c)(4). And judges retain jurisdiction after a decision and order to address fees and expenses. See 29 C.F.R. § 18.90(c). But that is it.
Considering the absence of Longshore-specific regulations or OALJ rules, an ALJ may look to the Federal Rules of Civil Procedure to address the appropriate procedure for fee disputes. FRCP 54(d)(2) addresses attorney’s fees. Based on that rule, a “court may establish special procedures to resolve fee-related issues without extensive evidentiary hearings.”
Other Courts Require Production of Defense Attorney Invoices in Fee Fights:
Although this post focuses on North District of Illinois’s Local Rule 54.3, other courts likewise allow discovery of defense attorney fee invoices during certain fee disputes. For example:
In Pollard v. E.I. Dupont De Nemours & Co., 2004 WL 784489 (W.D. Tenn. Feb. 24, 2004), the Western District of Tennessee determined that the defense firm’s invoices were relevant in a fee dispute. In response to the defense firm’s unsupported complaints about the plaintiff attorney’s time charges, the court wrote:
DuPont . . . cites no basis for its conclusion that the plaintiff’s attorney’s time spent in preparation was excessive. Therefore, it appears that DuPont’s own counsel’s time spent in preparing a response to Pollard’s petition for fees would serve as a logical yardstick from which to determine the reasonableness of such time expended by the plaintiff’s counsel.
In Paton v. Geico General Insurance Co., 190 So. 3d 1047 (Fla. 2016), the Florida Supreme Court likewise allowed discovery of the defense attorney’s invoices:
We . . . conclude that the billing records of opposing counsel are relevant to the issue of reasonableness of time expended in a claim for attorney’s fees, and their discovery falls within the discretion of the trial court when the fees are contested. When a party files for attorney’s fees against an insurance company . . . the billing records of the defendant insurance company are relevant. The hours expended by the attorneys for the insurance company will demonstrate the complexity of the case along with the time expended, and may belie a claim that the number of hours spent by the plaintiff was unreasonable, or that the plaintiff is not entitled to a full lodestar computation, including a multiplying factor.
Moreover, the entirety of the billing records are not privileged, and where the trial court specifically states that any privileged information may be redacted, the plaintiff should not be required to make an additional special showing to obtain the remaining relevant, non-privileged information.
Paton, 190 So. 3d at 1052.
Many other cases hold the same way. See, e.g., Henson v. Columbus Bank & Tr. Co., 770 F.2d 1566, 1574-75 (11th Cir. 1985); In re Fine Paper Antitrust Litig., 751 F.2d 562, 587 (3d Cir. 1984); Frommert v. Conkright, 2016 WL 6093998, at **2-3 (W.D.N.Y. Oct. 19, 2016); Mendez v. Radec Corp., 818 F. Supp. 2d 667, 668-69 (W.D.N.Y. 2011); Cohen v. Brown Univ., 1999 WL 695235, at **2-4 (D.R.I. May 19, 1999); Murray v. Stuckey’s Inc., 153 F.R.D. 151, 153 (N.D. Iowa 1993); Coal. to Save our Children v. State Bd. of Educ., 143 F.R.D. 61, 64-66 (D. Del. 1992); Real v. Cont’l Grp., Inc., 116 F.R.D. 211, 213-14 (N.D. Cal. 1986); Blowers v. Lawyers Coop. Publ’g Co., 526 F. Supp. 1324, 1325-28 (W.D.N.Y. 1981);Naismith v. Prof’l Golfers Ass’n, 85 F.R.D. 552, 562-64 (N.D. Ga. 1979); Stastny v. S. Bell Tel. & Tel. Co., 77 F.R.D. 662, 663-64 (W.D.N.C. 1978); Vulcan Materials Co. v. Chandler, 992 So. 2d 1252, 1268 (Ala. 2008); Miller v. Kenny, 325 P.3d 278, 303 (Wash. Ct. App. 2014).
The best way to resolve fee-related disputes without extensive evidentiary hearings is to require production of all attorney fee invoices. Open disclosure of relevant defense firm invoices in Defense Base Act claims would not create a “second major litigation.” Just the opposite. Undoubtedly, hypocritical objections would disappear overnight, leading to fewer line item objections and, most likely, fewer disputes presented to OALJ or OWCP.
My proposal is simple. Slightly modify present OALJ fee procedure orders–like the one quoted above–to also require production of the time sheets from the defense attorney’s invoices. Insert language from Northern District of Illinois’s Local Rule 54.3(d)(5) into the fee order, perhaps something similar to the following:
If Claimant seeks an award of attorney fees and costs pursuant to 33 U.S.C. § 928, an interim application conforming to the requirements of 20 C.F.R. § 702.132(a) shall be filed within 30 days of the date on which this Order [was issued]. Should Employer object to any fee or costs requested in the application, the parties shall discuss the matter and attempt to informally resolve any objections. Any agreement reached between the parties as a result of such discussions shall be filed in the form of a stipulation. If no agreement is reached after the receipt of the fee petition, then Employer/Carrier shall disclose the total amount of attorney’s fees paid (and all fees billed but unpaid at the time of the disclosure and all time as yet unbilled and expected to be billed thereafter) for the litigation and shall furnish invoices identifying time expended and expenses incurred. If the parties cannot resolve all issues relating to the requested fees and costs, Employer’s objection shall be filed no later than 30 days following service of the fee application. Any objection must be accompanied by a certification that the parties made a good faith effort to resolve the issues before filing the objection, and any invoices furnished by Employer/Carrier.
What’s the worst that can happen? The post-litigation production of documents that are already earmarked for voluntary production to another government office also in the Department of Labor? That cost pales in comparison to the benefits to judicial and DOL resources, and the financial savings inherent in avoiding contentious litigation.