Court: District Court, D. Colorado; December 30, 2015; Federal District Court
R. Brooke Jackson, United States District Judge, issued an order regarding attorney’s fees and costs. The plaintiff, Colorado Hospitality Services, Inc., sought $383,040.00 in attorney’s fees and $27,524.54 in costs. The defendant acknowledged the claim was excessive but did not suggest an alternative amount. Following an evidentiary hearing on December 29, 2015, the Court awarded $154,847.50 in attorney’s fees and $19,828.55 in costs.
The case involved an insurance coverage dispute stemming from damage to a hotel due to a hailstorm on June 6, 2012. After a claim was submitted, the insurer, Owners Insurance Company, estimated the loss at $52,231.13 and made a partial payment. Dissatisfied, the plaintiff engaged a public adjuster, leading to a disputed appraisal process. The plaintiff's appraiser estimated the loss at significantly higher amounts, but the Court later ruled that the plaintiff's appraiser was not impartial and vacated the appraisal award.
Subsequently, the case went to jury trial from July 20-23 and 27, 2015. The jury determined the actual cash value of the damage was $70,871.70 and found that Owners had unreasonably delayed or denied payment. The Court awarded the plaintiff $42,094.17 for breach of contract and a penalty of $84,188.34 for the unreasonable delay in payment, as per Colorado statutes. The Amended Final Judgment entitles the plaintiff to reasonable court costs and attorney’s fees, which are now disputed.
The determination of reasonable attorney’s fees is based on the lodestar method, calculated by multiplying the hours reasonably expended by a reasonable hourly rate. The plaintiff's representation included two law firms, with one firm billing $207,800 for 592.5 hours of work at various rates.
The Drake Firm, P.C. billed a total of $125,440.00 for 389.7 hours of work, while the plaintiff sought a total fee of $333,240 based on their hours and rates. The court must assess the reasonableness of these hours and rates, guided by the 12 factors from Johnson v. Georgia Highway Express, Inc. and Rule 1.5 of the Colorado Rules of Professional Conduct. Key factors for determining reasonable hours include the time and labor required, the novelty and difficulty of the questions, the amount involved and result obtained, and whether the fee was fixed or contingent.
Plaintiffs are expected to exercise billing judgment, but the court is not required to accept this judgment without scrutiny. Plaintiffs’ counsel initially submitted recorded hours without review, but later retained expert Richard M. Crane, who suggested reducing the hours by 25 to 30 percent due to perceived duplications, high hourly rates, and disproportionate fees relative to the outcome, proposing a revised range of 687 to 736 hours and a lodestar between $233,000 and $250,000.
Defendant’s expert, Franklin D. Patterson, criticized the plaintiffs’ time records for duplication and vague descriptions, estimating that reasonable hours for prosecuting insurance bad faith cases range from 400 to 700 hours. He characterized the case as relatively non-contentious, with limited discovery and no depositions.
The motion to vacate the appraisal award arose shortly before trial, during trial preparations. Expert Mr. Patterson estimated that the case should have required 500 to 550 hours to prosecute, with attorney time comprising 80 to 85 percent of the total billable hours. He suggested a lodestar amount between $143,000 and $148,000. Both sides’ experts acknowledged that the plaintiffs' unadjusted lodestar was excessively high. However, the experts, particularly those for the plaintiffs, improperly suggested reductions based on subjective assessments.
The plaintiffs' lawyers operated under a contingent fee agreement, but there was no discussion or documentation regarding the fee terms presented at the fee hearing. The attorneys present were unaware of how court-awarded fees should be treated. While contingent fee representation is valid, it often leads to unchecked billing practices, which may inflate recorded hours.
The case, primarily a standard breach of contract issue, did not warrant the extensive legal team involved, which consisted of six partners, two associates, five paralegals, and five law clerks. This large team likely caused inefficiencies due to duplication of efforts. The trial was conducted by partners Duffy and Loucks, with significant contributions from a paralegal and a law clerk, while the contributions of many other team members were deemed unnecessary. Consequently, time recorded by numerous Chicago attorneys and a paralegal from the Denver firm was eliminated, retaining a more reasonable team composition of three partners, one associate, two paralegals, and one law clerk. Despite the excessive staffing, the selection of counsel was respected.
The review of time entries for several attorneys revealed a pattern of recording hours in large blocks with vague descriptions, which undermines accuracy. Lead counsel Mr. Duffy frequently documented about 100 hours with minimal detail, such as "trial preparation." Although the lengthy preparation is acknowledged as important, many of Mr. Duffy's entries, including two 15-hour and three 18-hour days, do not meet the reasonableness standard established in *Ramos v. Lamm*. Other team members, including Mr. Loucks and paralegal Tiffany Skemp, also recorded substantial hours in similarly vague blocks during the trial. In contrast, entries from the Drake firm were somewhat more detailed, yet still included long hours like three days of 16-hour blocks. Ms. Blake's contribution during the trial was noted as largely passive, performing tasks that could have been handled by other team members. Despite recognizing the plaintiff's unreasonable delay by Owners, which contributed to the extensive billing, adjustments were made to the total hours claimed by the attorneys. The recalculated hours are as follows: Michael Duffy - 160 hours; Thomas Loucks - 70 hours; Tiffany Skemp - 110 hours; Marie Drake - 125 hours; Angela Schmitz - 173 hours; Amanda Bauer - 37 hours. Further adjustments for time spent on the motion to vacate the appraisal award were also addressed, emphasizing that a balance of wins and losses is inherent in legal proceedings.
Plaintiff's appraisal was flawed from the start, as highlighted in the order vacating the appraisal award. Had the plaintiff's counsel identified the issues with the biased public adjuster and appraiser, they could have avoided the need for a motion to vacate and court involvement. The appraisal process, intended to resolve disputes, instead complicated the case. Defense counsel sought to separate the hours spent by the plaintiff on the defense of the vacate motion, which were not disputed, leading to an acceptance of recorded hours for various attorneys: Michael Duffy (160 hours), Thomas Loucks (61.5 hours), Tiffany Skemp (105.25 hours), Marie Drake (120.5 hours), Angela Schmitz (133.3 hours), and Amanda Bauer (28.4 hours).
To determine reasonable hourly rates, key factors considered included the skill required, customary fees in the community, and the experience and reputation of the attorneys. The plaintiff initially provided minimal evidence to support their claimed rates beyond their own assertions. Citing the case Etherton v. Owners Insurance Company, the court noted that reasonable rates were found to be $300 per hour for a lead attorney with 22 years of experience and $200 per hour for those with lesser experience. Other cited cases indicated rates ranging from $110 to $440, depending on the attorneys' experience. Plaintiff's expert, Mr. Crane, acknowledged the high rates charged by the leading plaintiffs insurance bad faith firm in Colorado, concluding that while plaintiff's counsel rates were slightly high, he did not propose a specific adjustment. He recommended a 25-30% reduction of the total fee requested. Defendant’s expert highlighted that plaintiff's lawyers generally work on a contingent fee basis in similar cases.
An assessment of reasonable attorney's fees in a legal case has been conducted. The following rates are deemed appropriate for various timekeepers based on their experience and roles:
- **Michael Duffy**: $400/hour. As lead trial counsel with substantial experience in insurance litigation, his work is characterized as that of a competent specialist, although he typically operates on a contingent fee basis and does not bill clients at his standard rate of $500/hour.
- **Thomas Loucks**: $325/hour. An experienced plaintiffs lawyer, Loucks worked primarily in a supportive role during the case, contributing to jury instructions and client communication without handling any trial components.
- **Tiffany Skemp**: $100/hour. As a paralegal since 2012, Skemp's customary rate was determined to be reasonable at $100/hour, despite higher billing rates observed at her firms.
- **Marie Drake**: $250/hour. With 16 years of civil litigation experience, much of which was in areas outside of insurance, Drake's role in this case was comparable to a junior associate, warranting a reduced rate.
- **Angela Schmitz**: $200/hour. Schmitz, an associate attorney with a background in civil litigation since 2003, has been deemed appropriately rated for her contributions to the case.
The proposed rates reflect a comprehensive evaluation of skills, experience, and the performance of the timekeepers involved, along with testimonies and comparative rates established in previous cases.
Ms. Drake's hourly rate is set at $300, determined through case law review and peer discussions, rather than client billing. Despite being high, her significant role in the case justifies this rate. Amanda Bauer, a paralegal with five years more experience than Ms. Skemp, has a rate of $125 per hour, reflecting Mr. Patterson’s high-end range. The adjusted lodestar, calculated by multiplying reasonable hours by the established hourly rates, totals $154,847.50. This figure is above the defendant's expert's range of $143,000 to $148,000 but below the plaintiffs' expert's range of $233,000 to $250,000, indicating it is reasonable. The adjusted lodestar exceeding the jury verdict is acceptable, as demonstrated in Bagher v. Auto-Owners Insurance Company, where fees surpassed the awarded damages due to the case's important remedial purpose. Owners proposed limiting the fee award to 5-10% of the lodestar, suggesting a range of $7,000 to $15,000, which is firmly rejected.
Regarding costs, the plaintiff requests $27,230.44, but Owners argues that C.R.S. 10-3-1116 only allows for court costs as per 28 U.S.C. 1920, a claim lacking supporting authority. The statute is deemed remedial, permitting the recovery of all reasonably incurred costs. However, the plaintiff's cost itemization lacks sufficient detail and documentation, failing to meet the standards set in Brody v. Hellman. While the incurred costs are not disputed, only reasonable costs can be awarded.
Costs for professional services provided by Charles M. Miller and Genesis Weather Solutions, LLC were not awarded due to a lack of trial testimony and insufficient information regarding the nature and reasonableness of their services. The court identified reasonable costs based on the plaintiff's categories, awarding a total of $19,828.55 in costs, which included $2,804.10 for court costs, depositions, copies, and filing fees, while assigning $0 for the services of both Miller and Genesis Weather Solutions. The court granted the plaintiff, Colorado Hospitality Services, Inc. d/b/a Peoria Hospitality, LLC, $154,847.50 in attorney's fees against the defendant, Owners Insurance Company, with an amended final judgment to be issued.
The court considered the Johnson factors in determining attorney's fees, focusing on aspects such as time and labor, novelty of issues, customary fees, and the attorneys’ experience. The defense had three lawyers present, but the court noted a lack of transparency regarding the number of hours billed by defense counsel, which complicated the assessment of reasonable costs. Most costs claimed by the plaintiff were accepted as routine in civil litigation, although certain items, such as service process fees and some travel costs, were excluded due to insufficient clarity on their necessity or reasonableness. Overall, the court aimed to award costs that could be reasonably inferred from the documentation provided, while acknowledging the possibility of omitting some expenses that could have been justified.
